Background on Pharmacy Benefit Management (PBM) Transparency
HometownRx has been involved in the pharmacy benefits management (PBM) industry since the late 1980's. Even with the advent of prescription cards and national pharmacy networks, we have continued to succeed on a local and regional level because of our focus on service. Recently technology has become available that will allow us to compete nationally with PBMs like Medco, Caremark, and Express Scripts.
HometownRx views the services provided by a traditional PBM as that of a Technology Partner. Given our experience as a PBM, our knowledge of Pharmacy, and our Pharmacy Administered Benefits technology we are in a unique position to be a Clinical Partner as well.
As a Technology and Clinical Partner we also recognize a need for full disclosure. As a provider who is currently being reimbursed by PBMs like Caremark we believe that the business practices of these PBMs has contributed to the growing cost of health care in the United States. The following excerpts from 'The Truth about Transparency' demonstrate a need for change in the PBM industry.
A Nationally Recognized Need for Transparency1
Over the past few years, the term transparency has become one of the most widely used in the pharmacy benefit management (PBM) industry. Use of the term began after plan sponsors realized that some PBMs were playing "games" with rebate accounting and pricing practices. It was a simple strategy. In fact, it was one used by other industries. The PBM would promise artificially low or free administration fees, but would recoup those fees by exploiting other revenue streams related to the clients' business, with, or without, their knowledge. Recognizing that these games were costing money - potentially lots of it - government and other plan sponsors acted.
Elements of Disclosure in a Transparent PBM1
- Low net cost strategy for clients.
- Pass-through pricing (revenues go directly to the plan sponsor).
- Full revenue disclosure (all revenue related to a book of business is disclosed including pricing and alternative revenues).
- All fees from retail pharmacies are agreed upon and disclosed.
- All formulary rebate administrative fees from manufacturers are disclosed.
Summarizing the Importance of Transparency and Full Disclosure2
In this era of escalating healthcare costs and intense scrutiny on all facets of PBM pricing and practices, what plan sponsors really need are pharmacy benefit programs that exemplify the principles of knowledge, innovation and commitment. Health plans, employers, union trusts and other plan sponsors have every right to demand a PBM that offers the best pricing and overall programs, without games, without empty promises and without allegiances to outside organizations. The result of an open approach to pricing will be more assurances of fairness, lowest prices and ultimately a more stable and higher quality pharmacy benefit program for your client and their members.
Generic Drugs by Mail Can Be a Raw Deal (PDF file)
Accounting Principles, Revenue Recognitions, and the Profitability of Pharmacy Benefit Managers (PDF file)
Examining the Value of Pharmacy Benefit management Companies (PDF file)
The Spread: Pilot Study of an Undocumented Source of Pharmacy Benefit Manager Revenue (PDF file)
Employers Advise To Tweak Formularies to Increase Users' Awareness of Drug Costs (PDF file)
1'The Truth about Transparency' September 2004 John D. Jones, R.Ph., J.D., Vice President, Regulatory Affairs and Health Policy Prescription Solutions