PBMs: Part of Solution in Health Reform

Posted July 15, 2009 at 2:19pm

Health care reform faces four major challenges: reducing costs, improving care, expanding access and ensuring, if nothing else, to “do no harm.— [IMGCAP(1)]These are things America’s pharmacy benefit managers do every day for 210 million Americans enrolled in Medicare, Fortune 500 employer plans, union plans, the Federal Employees Health Benefits Program and other programs. In health care reform, the key is to avoid policies that make it harder or more expensive to deliver benefits while pursuing policies that actually improve health care.PBMs typically reduce drug benefit costs by 30 percent for public and private payers by encouraging the use of generic drug alternatives, negotiating discounts from manufacturers and drug stores, saving money with home delivery, and using health information technology like e-prescribing to reduce waste and improve patient safety. Prior to the advent of these tools, there was no system-wide approach to fully address the real dangers and costs of misuse, overuse or underuse of prescription drugs. In the Medicare Part D program, PBMs have used these tools to help keep overall program costs 30 percent below original projections.PBMs accomplish these goals for thousands of different employer and health plan clients who have different needs and different resources available to finance health benefits. However, all PBM clients share the goal of wanting benefits that provide great access, are affordable, and help retain and recruit top-notch personnel.A good example of this is the FEHBP, which provides pharmacy benefits to millions of federal employees (including Members of Congress). The federal government must compete for quality employees with the private sector, which is often able to offer higher salaries than those available to federal workers. The government counters this advantage by providing high-quality benefits — including pharmacy benefits — that are comparable and even superior to those offered by many higher-paying, private sector competitors. In light of this, it is not surprising that FEHBP enrollees are extremely satisfied with their health benefits. Similar to the commercial sector, the FEHBP purchases these benefits through a request for proposal contract and gives the Office of Personnel Management the right to audit the program to ensure those terms are being met.This private sector approach is much different from the ones used by other government programs such as the Veterans Health Administration, which doesn’t need to recruit or retain enrollees. To save money, the programs simply use artificial price controls, severely restrict drug choices and, in the case of the VHA, include only a handful of the nation’s 60,000 pharmacies in their networks. These draconian steps would significantly undermine the personnel goals of most organizations that offer drug benefits.Policymakers need to be wary of other policies that could undermine the incentives and tools PBMs use to lower costs and enhance quality. It would be a mistake, for example, to force PBMs to publicize the discounts they negotiate with drug manufacturers and drug stores. If sensitive pricing information is made public, the greatest benefactors are not consumers or taxpayers, but drug manufacturers, drug retailers and others who learn their competitors’ negotiating strategies and raise prices accordingly. The Federal Trade Commission and others have explored this issue and found that the wrong kind of transparency increases, rather than decreases, costs. The Congressional Budget Office concluded that such a policy would have increased Medicare Part D’s costs by 10 percent if it had been included in the program.As policymakers seek specific ways to constrain costs, there are several common-sense policies that can accomplish this without restricting access to medications or shifting costs from one part of the health care system to another. These include:• Real biogenerics reform: Real biogenerics legislation is strongly supported by the AARP, the AFL-CIO, the Ford Motor Co., the Pharmaceutical Care Management Association and dozens of other consumer, labor and employer organizations concerned about runaway health care costs in both the private and public sectors. This proposal — which allows generics to compete with expensive biotech medicines the way they already do with conventional brand-name drugs — is one of the few proposals that actually delivers score-able savings and is a good bellwether for health reform prospects overall.• Reduce waste by making formularies in Medicare Part D more closely resemble those in FEHBP. This could include eliminating “protected drug classes— in Medicare. These Part D provisions eliminate price competition among manufacturers without providing seniors greater access to those drugs. This reform alone would save Medicare $4.2 billion over 10 years, according to the Centers for Medicare & Medicaid Services.• Increase efficiency and save billions by allowing greater use in Medicare of home delivery for refills of long-term, chronic medications. Seniors appreciate the convenience and are more likely to stay on their drug regimens if their long-term maintenance medications are delivered right to their homes.These steps, coupled with PBMs’ proven track record of improving quality, reducing costs and expanding access to affordable prescription drugs, are true steps toward health care reform.Mark Merritt is president and CEO of the Pharmaceutical Care Management Association.