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).
Mike Winkelman

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