Undocumented source of pharmacy benefit manager revenue.

PURPOSE: The difference between what pharmacy benefit management companies (PBMs) charge prescription benefit plan sponsors and what dispensing pharmacies are paid ("spread") was studied. METHODS: Data from prescription transaction invoices from two large employer groups, each using a different PBM, and 84 community pharmacies (which differed for each employer group due to clear geographic separation) participating in these plans between October 1, 2002, and December 31, 2004, were studied. Detailed community pharmacy payment transaction records were compared with PBM claim records from two employers. One employer provided 49,633 prescription claim records, and the other employer provided 120,684 prescription claim records. Spread between amount due billed to the employer by the PBM and amount due paid to the dispensing pharmacy by the PBM for all prescriptions, for brand-name prescriptions, and for generic prescriptions was analyzed. RESULTS: For the two PBMs combined, the mean +/- S.D. spread for 20,376 paid transactions was $1.82 +/- $8.26 per prescription. The mean +/- S.D. spread for brand-name prescriptions was $0.07 +/- $5.18 and for generic medications was $4.20 +/- $10.69 per prescription. The two PBMs differed significantly in their spread for all drugs ($2.30 +/- $6.17 and $1.78 +/- $8.40) and for brand-name drugs ($0.47 +/- $3.21 and $0.04 +/- $5.30). The difference between PBMs for spreads on generic medications did not achieve statistical significance. CONCLUSION: Wide variations in spread pricing existed between two PBMs and between brand-name and generic medications. Pharmacists and prescription benefit plan sponsors should be aware of this discrepancy and seek a more transparent contract with PBMs.

Formulary tier placement for commonly prescribed branded drugs: benchmarking and creation of a preferred placement index.

OBJECTIVES: To examine the relative preferred placement of commonly dispensed prescription drugs and to assess variations in drug coverage across a convenience sample of 12 health insurance plans. STUDY DESIGN: A cross-sectional analysis of the plans focused on all 67 patented brand-name prescription drugs from among the top 200 prescribed drugs in 2004. METHODS: For each plan, we created a preferred placement index representing the percentages of drugs that were positioned on the formulary with preferred placement, defined as tier 2 without restricted access. A separate cardiovascular index was also created. Sensitivity analyses determined the effect of limiting the sample to the top 25 patented branded drugs and examined the robustness of our index when prior authorization restrictions were allowed. RESULTS: Across 67 drugs and 12 insurance plans, drugs were rated as having preferred placement 59.1% of the time. The preferred placement index ranged from 31.3% to 88.1% across the plans for the full sample of 67 drugs; for the sample of cardiovascular drugs, the range was 25.0% to 100.0%. Results were robust across sensitivity analyses. CONCLUSIONS: Based on this convenience sample of 12 formularies, there is a wide variation in preferred placement of the most commonly prescribed branded medicines across insurers. The wide range implies that the specific insurance coverage a patient selects may have an effect on whether his or her prescribed drugs have preferred formulary placement and on his or her out-of-pocket drug expenditures.

What's in a name? Use of brand versus generic drug names in United States outpatient practice.

BACKGROUND: The use of brand rather than generic names for medications can increase health care costs. However, little is known at a national level about how often physicians refer to drugs using their brand or generic names. OBJECTIVE: To evaluate how often physicians refer to drugs using brand or generic terminology. DESIGN AND PARTICIPANTS: We used data from the 2003 National Ambulatory Medical Care Survey (NAMCS), a nationally representative survey of 25,288 community-based outpatient visits in the United States. After each visit, patient medications were recorded on a survey encounter form by the treating physician or transcribed from office notes. MEASUREMENTS: Our main outcome measure was the frequency with which medications were recorded on the encounter form using their brand or generic names. RESULTS: For 20 commonly used drugs, the median frequency of brand name use was 98% (interquartile range, 81-100%). Among 12 medications with no generic competition at the time of the survey, the median frequency of brand name use was 100% (range 92-100%). Among 8 medications with generic competition at the time of the survey ("multisource" drugs), the median frequency of brand name use was 79% (range 0-98%; P < .001 for difference between drugs with and without generic competition). CONCLUSIONS: Physicians refer to most medications by their brand names, including drugs with generic formulations. This may lead to higher health care costs by promoting the use of brand-name products when generic alternatives are available.

Prescription drug prices: why do some pay more than others do?

The fact that sick elderly people without prescription drug coverage pay far more for drugs than do people with private health insurance has created a call for state and federal governments to take action. Antitrust cases have been launched, state price control legislation has been enacted, and proposals for expansion of Medicare have been offered in response to price and spending levels for prescription drugs. This paper offers an analysis aimed at understanding pricing patterns of brand-name prescription drugs. I focus on the basic economic forces that enable differential pricing of products to exist and show how features of the prescription drug market promote such phenomena. The analysis directs policy attention toward how purchasing practices can be changed to better represent groups that pay the most and are most disadvantaged.