Cook A, Kornfield T, Gold M; Academy for Health Services Research and Health Policy. Meeting.
Abstr Acad Health Serv Res Health Policy Meet. 2000; 17: UNKNOWN.
Presented by: Anna Cook, Ph.D, Mathematica Policy Research, 600 Maryland Ave., SW, #550, Washington, DC 20024.
Research Objective: Extending a drug benefit to Medicare beneficiaries has been a highly publicized issue in 1999. The debate turns on the question of how to finance and administer such a benefit while controlling its cost. To address this dilemma, some have proposed using pharmacy benefit managers (PBMs) to administer a Medicare drug benefit. PBMs are companies that administer pharmaceutical benefits for health plans, HMOs, and employers while managing drug utilization and obtaining discounts from both retail pharmacies and manufacturers. This paper examines the role that PBMs could play in managing a Medicare drug benefit.Study Design: The analysis is based on a review of the literature and on recent interviews with senior executives in the PBM industry and with pharmacy benefit consultants. The paper has two parts. First, it defines PBMs, explains what they do, and gives background data on the industry. Second, it examines the implications of using PBMs to manage a Medicare drug benefit.Principal Findings: Advantages of PBMs include their experience: PBMs have managed drug benefits in settings very similar to Medicare fee-for-service. In addition, PBMs could help to contain the cost of a Medicare drug benefit by steering utilization toward more cost-effective drugs (through formularies, tiered copayments and negotiated discounts). PBMs could also increase the quality of prescription drug services for many Medicare beneficiaries. For the first time, many would have their purchases tracked through a comprehensive database, allowing for more thorough reviews that can help to prevent adverse drug reactions.Yet, the level of savings that PBMs could attain cannot be automatically ensured. The amount of savings would depend largely on how much flexibility Congress and HCFA give PBMs to apply a broad range of techniques to promote the use of cost-effective drugs. In addition, conflicts of interest would need to be monitored. When PBMs use formularies to favor one brand-name drug over another based partly on payments received from manufacturers, a potential conflict of interest arises. Guidelines for PBM formularies might be required.Conclusion: According to our interviews with PBM industry senior executives, PBMs expect few technical challenges in administering a Medicare drug benefit. The key challenges envisioned by PBM executives stemmed from the political environment in which Medicare decisions are made. As clients in the private sector have helped to define what techniques PBMs use to contain costs, so would the federal government need to spell out the techniques that would be permissible under a Medicare drug benefit.Implications for Policy and Practice: Even if the pluses of PBMs outweigh the minuses, certain operational issues would still have to be considered. Such issues include: (i) targeting contract provisions to hold PBMs accountable for their performance without putting them at risk for factors that are beyond their control; (ii) structuring beneficiary copayments; (iii) educating beneficiaries; (iv) setting Medicare payment rates to PBMs; and (v) determining how best to structure the geographic scope, duration and number of PBM contracts per region to minimize beneficiary confusion and promote quality and stability over time.Primary Funding Source: The Henry J. Kaiser Family Foundation.
Publication Types:
Keywords:
- Contracts
- Costs and Cost Analysis
- Drug Costs
- Drugs, Generic
- Formularies
- Health Maintenance Organizations
- Humans
- Medicare
- Negotiating
- Pharmaceutical Preparations
- Pharmacies
- economics
- hsrmtgs
Other ID:
UI: 102272462
From Meeting Abstracts