A day in the life of a radical pharmacy owner

What is a PBM and why are they so evil? I alluded to it in my other post so I felt that the subject should be addressed.

PBM Background Facts:
Pharmacy benefit managers or "PBMs" are fiscal intermediaries that specialize in the administration and management of prescription benefit programs. PBMs contract with a range of clients, including HMOs, employers, unions, preferred provider organizations and other health plans.
PBMs purchase in huge volumes and have extensive networks of participating pharmacies. Bulk purchasing enables PBMs to negotiate rebates from drug manufacturers and discounts from retail pharmacies. PBMs process hundreds-of-millions of pharmaceutical claims per year. In addition, they run mail-order fulfillment centers and provide other services to health plans.
PBMs also develop and manage drug formularies. Formularies are drug lists that PBMs develop and use to manage drug spending. By charging less for certain brands of drugs, PBM formularies steer health care consumers and their physicians into using particular drugs for particular therapeutic needs. The consumer pays a higher co-pay (and the health plan pays the PBM more) for drugs that are not in the "preferred" category on the PBM's formulary. The health plan may provide no coverage for drugs that are not on the list.
Control of formularies gives PBMs tremendous influence with drug companies. The manufacturers typically compete and pay a combination of rebates and fees to secure most favorable placement on a formulary. Drug manufacturers typically pay PBMs: (i) access rebates for placement of products on the PBM's formulary; (ii) market share rebates for garnering higher market share than established targets; (iii) administrative fees for assembling data to verify market share results; and (iv) other fees and grants.

This is taken from the National Community Pharmacist Association website. It is one of the professional associations I belong to. This is summary of how PBM's are affecting the cost of health care.

PBM$: What You Should Know

NCPA members attending the legislation and government affairs conference also let it be known that their top complaint is the conduct of PBMs. PBMs have evolved from their original role of claims processors into the unauthorized practice of medicine and pharmacy with inappropriate consequences, including the following:

• PBMs dictate what medication the patient may have based on special payments the PBM receives, not on the basis of the patients' health status.
  
• PBMs force take-it-or-leave-it contracts on community pharmacists. PBMs claim the contracts are negotiated, but they are not. These contracts ratchet down the payment to pharmacies, but produce no savings to the health-care system. Instead, those dollars go to PBM profits and bonuses and drive up the prescription drugs costspayersayors.
  
• PBMs coerce patients into using unregulated mail order. Studies show that patients, especially seniors, prefer their local independent pharmacy to mail order. PBMs restrict the local pharmacy to offer a 30-day prescription and then offer a 90-day mail order prescription with special incentives. Mail order medications are exposed to extreme temperatures and even to high doses of radiation.
  
• Despite PBM claims of reducing the cost of prescription benefits, prices have increased more than 16.8% in 1998, 14.2% in 1999, 16.3% in 2000, 16.9% in 2001, 18.4% in 2002, 19.5% in 2003, and an estimated 18.1% for 2004. PBMs actually contribute to increased costs. For example, while the average cost of a brand name prescription is more than $70, the average price for a generic prescription is $20. The three giant PBM mail order companies dispense generics 29% of the time, while the community pharmacy rate is 53%. Do the math!
  
• PBM contracts payersayors incentivize unscrupulous audits that over-charge pharmacies. Ironically, because there is no state regulatory oversight of PBMs, there are insufficient checks and balances for PBMs, resulting in few, if any, meaningful PBM audits.
  PBMs are gouging payors, resulting in further escalation in the cost of prescription drug coverage through devious practices known as "spread pricing". For example, a pharmacy is paid $20 for dispensing a generic prescription and the payor is billed $100 for the same prescription by the PBM.
  
• PBMs are creating chaos in community pharmacies. PBMs do not allow pharmacists to perform their professional functions because they are forced to act as plan intermediaries. Pharmacists must also contend with inaccurate patient information sent to the pharmacy by the PBM. Pharmacists must contend with a variety of inconsistently formatted PBM prescription cards. Additionally, pharmacy personnel spend at least 20% of their time, with no PBM compensation, for such unnecessary distractions.
  
• PBMs operations are unregulated, while pharmacists, pharmacies, and insurers are highly regulated by states.