Industry sources confirm what Pharmacy Benefit Consultants always tells its clients, namely that PBMs are including “creative pricing” provisions in their contracts with clients, and thus greatly adding to client costs.

According to an article in AIS’s Health Business Daily, PBMs are unbundling their services and thus adding new fees for care management and disease management programs.  PBMs are also “creatively” adding contract terms like the following to their clients’ contracts:

  • Pricing Guarantees for the entire contract term (typically 3 years) — rather than annual guarantees — meaning clients will be unable to audit or enforce their guarantees until the full contract period has passed
  • Tiered Incentives and Pricing to Encourage Greater Mail Pharmacy Usage: Note that PBMs make their greatest profits from mail order drugs, unless clients are smart enough to contractually require pass-through pricing for every mail order drug dispensed
  • One Time Enrollment Fees for each client location
  • Annual Charges for electronic fund transfers
  • Pricing That Appears To Improve Over The Life of the Contract: Note our inclusion of the phrase “appears to improve”.  Unless clients insist on “airtight” contract definitions of “brand drug” and “generic drug”, PBMs’ purportedly better pricing discounts are likely never to materialize, since all PBMs need do is categorize more drugs as “brand drugs” to satisfy their purportedly improved discounts.

The AIS article also reports on the “most prevalent discounts” found in PBM/client contracts, and reports those discounts to be:  (i) AWP-18% for retail brand drugs; (ii) AWP-25% to 30% for mail brand drugs; and (iii) AWP-60% to 78% for retail or mail generic drugs.   However, don’t rely on — or be fooled by – any of the above numbers.

Don’t forget — virtually all PBMs include ambiguous definitions of “brand drug” and “generic drug” in their contracts, meaning PBMs can promise inflated AWP discounts, knowing they can easily satisfy their inflated figures simply by re-categorizing more “brand drugs” as “generics”.