This document is updated weekly, but why is it important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to health care reform.  The costs shared here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders. How to Determine if Your Company [or Client] is Overpaying Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month. Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list. Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It's impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions. Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 5% or more price differential (paid versus actual cost) we consider this a problem. Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month. -- Tip -- Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving. When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization. In this case, the market check language is effectually meaningless.

[Click to Enlarge] While Congress has taken drug executives to task with high-profile committee investigations of price increases on everything from HIV medication to EpiPens, a crucial link in the drug-price chain has gone largely unscathed: pharmacy benefit managers, who play an obscure by significant role in determining the cost paid for prescription drugs by tens of millions of Americans. But as the new Republican Congress once again takes on the task of overhauling the U.S. health care system, the relative anonymity of PBMs might be about to come to an end. As PBMs have grown in size, they have begun attracting an increasing amount of controversy over their how much savings they actually produce, which could make them a target for state legislatures and as part of any repeal of the 2010 health care law. Criticism has mounted from pharmacists, consumer advocates and large employers, who claim that PBMs are abusing their position as middlemen in a complex industry to reap huge profits, while providing little in return to clients and consumers. PBMs, though hardly a household name, are nothing new in American health care. The first ones were formed in the 1970s to serve as intermediaries between the health plans that covered pharmaceutical prescriptions and the pharmacies that filled them.  Initially this role was administrative, with PBMs merely shuffling paper between the two groups. As drug costs continued to rise however, PBMs were able to sell themselves not just as administrative functionaries, but as managerial experts who could use their knowledge of the pharmaceutical industry to deliver more effective, less expensive prescription benefit programs. This reinvention of PBMs has led to an explosion in their size and scope. Today, PBM companies like Express Scripts and CVS Caremark handle everything from negotiating prices with drug manufacturers and setting co-pays, to creating pharmacy networks and determining which drugs your health plan will cover. The added responsibilities PBMs have taken on has proven very lucrative for the industry, which pulls in roughly $423 billion in annual revenue. Express Scripts alone — the largest PBM — earned $101 billion in revenue 2015, and is responsible for the drug coverage of more than 100 million people. Beating the spread The problem, says Susan Pilch, of the National Community Pharmacy Association, is the PBM industry’s lack of transparency. Everything from negotiating with drug manufacturers, to reimbursing pharmacists is done in secret, says Pilch, which enables PBMs to charge outrageous prices to their clients, which more than make up for any discounts they might extract from drug manufacturers. To illustrate this point, she provides the example of spread pricing, where a PBM will reimburse pharmacies for the cost of filling a prescription at one price, and then turn around and charge a higher price to their client for the same drug. Tyrone's comment: While I'm a critic of legacy PBMs and their lack of transparency, some of the blame for their opacity goes directly to purchasers of PBM services and the consultants they rely upon. The…