Two Newly Published Articles Explain how Health Plans can Stop Hemorrhaging Money and Maximize their Generic Drug Savings
This article summarizes two newly published articles that reveal how PBMs are stuffing their clients’ contracts with ambiguous provisions that enable PBMs to rob their clients of a large portion of their generic savings. Also summarized are the two articles' recommendations about how PBM clients can change their PBM contract terms to ensure clients obtain all generic savings. The articles were written by an industry expert, the President of Pharmacy Benefit Consultants, Linda Cahn.
Morristown, NJ (PRWEB) December 14, 2010
According to two recently published articles written by an industry expert, PBMs are stuffing their clients’ contracts with ambiguous contract terms that enable PBMs to rob their clients of a large portion of generic drug savings.
The articles were written by Pharmacy Benefit Consultants' President Linda Cahn, and published serially in the highly regarded magazine, Managed Care. The articles detail the contract ploys that PBMs use to keep a large portion of clients' generic drug savings, and explain exactly what health plans must do to change their contracts, end PBMs’ practices and ensure that health plans retain all available generic drug savings.
The initial article focuses on PBM’s manipulation of “brand drug” and “generic drug” contract definitions. In the article, Linda Cahn explains that most PBMs purposely write ambiguous contract definitions that enable PBMs to mis-categorize “brand drugs” as “generics”, and “generic drugs” as “brands”, depending on which categorization best suits PBMs’ interests.
For example, when invoicing clients, PBMs categorize numerous “generics” as “brands”, which enables PBMs to provide far weaker discounts to clients when invoicing for millions of generic drug prescriptions. However, when calculating the amount of rebates owed to clients -- or the PBMs’ generic dispensing rates -- PBMs categorize numerous “brands” as “generics”, which enables PBMs to decrease their rebate payments to clients, and inflate their generic dispensing rates.
To end PBMs’ practices, Linda Cahn urges all health plans to demand entirely different definitions in their PBM contracts. "Write airtight definitions for 'brand drug' and 'generic drug in your PBM contracts", says Cahn, "and you'll take the first step toward maximizing your generic drug savings." Cahn's initial article, which can be read here, details exactly how to write different definitions for both contract terms.
In a second article in Managed Care magazine, Linda Cahn explains additional contract terms that payers must demand to ensure payers obtain all their generic drug savings. Cahn urges payers to require pass-through pricing for all brand and generic drugs -- whether dispensed from retail or mail pharmacies -- meaning that PBMs will have to invoice payers using PBM's actual cost for each retail and mail generic drug dispensed. Cahn also says clients must undergird the contract's pass-through pricing provisions with airtight contract guarantees to ensure the PBM's pass-through pricing will be marketplace competitive.
The article explains that PBM clients should include at least 18 different retail and mail contract guarantees in their PBM contracts, including three generic guarantees in each of the three basic pharmacy channels (retail, retail 90 and mail). The three generic guarantees should be for (i) all generics that are within the 180 day exclusivity period; (ii) all generics that are not within the 180 day exclusivity period; and (iii) an "all-in" generic guarantee for all drugs that are defined as “generic drugs”. Cahn explains that the above guarantees will enable payers to eliminate all “MAC” (maximum allowable cost) terms from their contracts -- which is imperative says Cahn -- since MAC is nothing but a “mousetrap” that PBMs use to charge whatever they want for generic drugs.
Cahn’s second article, which can be viewed in its entirely by clicking on this link, contains many other generic savings suggestions, including advice to create "maximum per unit costs" for commonly used generics that are the heart of savings programs, and methods to ensure that clients receive the lowest available costs for newly available generic drugs.
Cahn makes clear why all PBM clients should act now: "In these tough economic times, no health plan can afford to hemorrhage money and squander potential savings from generic drugs," says Cahn. "We urge every health plan to take advantage of the detailed advice provided in these free articles -- by reading the articles, examining your contract to determine which weaknesses it contains, and thereafter demanding entirely different contract provisions from your PBM, either in direct contract negotiations or in PBM RFPs.”
Cahn adds: "RFPs are the single best method to force PBMs to stop stuffing their contracts with ploys that drive up client costs. However, clients must use the RFP's leverage to extract better contract terms from PBMs, rather than simply getting answers to consulting firm questionnaires. Otherwise, RFPs will prove worthless, and clients will end up with yet another contract at the end of their RFPs that is stuffed with loopholes that will drive up their costs."
To talk with Linda Cahn about the substance of her articles, call Pharmacy Benefit Consultants at 973 975-0900, or go to the firm's website at http://www. PharmacyBenefitConsultants. com and send in your questions using the contact form.
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