Categories

Tag: ESRX

What’s the next way PBMs will make money?

Yesterday Medco offered itself up to smaller competitor Express Scripts, creating an entity with more than 50% of the PBM market. PBMs originated as specialized claims processors that supposedly were able to reduce drug costs. But in the 1990s  drug costs soared. Somehow PBMs didn’t lose employer clients, further confirming that employers are dumb about how they buy health care. Most employers didn’t understand that PBMs made much of their profits on rebates they were paid by drug companies to keep particular drugs on formulary. Almost none of that money went back to the employer. After that game ended, PBMs replaced almost all those profits by making huge margins on generics until Walmart showed that it could make a profit by charging only $4 a fill. Now it looks like extracting a bigger piece of the pie from pharmacies and charging more to employers may be the only game left for PBMs. And that’s probably the driver behind the merger.