The Pharmacy Benefits Landscape

Generics now account for over 75% of all prescriptions, yet most of the cost is for brand name prescriptions.
Specialty medicine costs are growing very rapidly.
Health Plans are shifting more and more of the costs to plan recipients; four-tier copay plans are now commonplace.
The top few PBMs control most of this market and their profits are quite remarkable. Their pretax earnings are in the range of $3.00 per claim, much more than the pharmacies earn.
Since these PBMs typically charge only nominal administrative fees, most of their profits are derived from opaque and often tricky tactics that are hard to detect.
There is now a small number of PBMS that offer fully transparent and pass-through programs, which lower net costs, but Health Plans are adapting slowly.
Mail Order pharmacy accounts for about twenty percent of retail drug sales, and is a major profit center for PBMs. But Mail Order savings may be more ephemeral than real. In fact, most PBMs now offer 90-day retail programs that yield similar savings while preserving the relationship with the community pharmacy.
Medicare Part D is now a very important part of the pharmacy landscape, but changes are underway as the government modifies the incentives for health plans to continue to cover drug benefits for their Medicare-eligible retirees. As a result, wise Health Plans will migrate from the Retiree Drug Subsidy (RDS) to the Employer Group Waiver Plans (EGWPs).