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Five Largest PBMs

September 26, 2011 By: Nadia Category: HealthCare, Medtipster, Prescription News

www.Medtipster.com Source: Mallory Gillikin, 9/20/2011, www.BusinessInsurance.com

Business Insurance released its ranking of the nation’s largest pharmacy benefit managers. 

  1. Medco - Franklin Lakes, N.J.-based firm reported $66 billion in unbundled PBM revenues in 2010, a 10.4% increase from 2009
  2. CVS Caremark Corp.  – Woonsocket, R.I.-based firm retained the No. 2 position in the 2011 ranking, reporting $47.8 billion in unbundled PBM revenues in 2010, a 6.4% decrease from 2009.
  3. Express Scripts Inc. – Reporting nearly $45 billion in unbundled PBM revenues in 2010, St. Louis-based  firm remained in the No. 3 position in this year’s Business Insurance ranking. Express Scripts, which acquired WellPoint Inc.’s NextRx subsidiaries in December 2009, reported an 81.7% increase in unbundled PBM revenues in 2010.
  4.  Prescription Solutions Inc. - Irvine, Calif.-based firm and
  5. Catalyst Rx - Rockville, M.D.-based firm rounded out the top five largest PBMs.

To view the full ranking or to purchase copies of the 2011 Directory of Largest Pharmacy Benefit Managers, go to www.BusinessInsurance.com/directories.

Generic drugs saved Medicare and beneficiaries $33 billion in 2007

September 16, 2010 By: Nadia Category: HealthCare, Medicine Advice, Medtipster, Prescription News, Prescription Savings

www.Medtipster.com Source: Associated Press (AP) – 9.16.2010

Generic medications saved the government and Medicare prescription drug plan beneficiaries about $33 billion in 2007, according to a Congressional Budget Office report.

The report, highlighted on Wednesday by the trade group Pharmaceutical Care Management Association, says an additional $14 billion is expected as first-time generics enter the market through 2012. Medicare Part D is Medicare’s prescription drug program.

“This new research highlights the importance of this proven pharmacy benefit management cost-savings tool,” the Pharmaceutical Care Management Association said in a statement. “Tools pioneered by pharmacy benefit managers, including encouraging the use of generic medications, have lowered costs and expanded access to prescription drugs for seniors in Medicare Part D.”

Pharmaceutical Care Management Association is a trade and lobbying group representing pharmacy benefit managers. During the second-quarter of 2010, the group spent $551,889 lobbying the federal government on issues that affect pharmacy benefit managers, including federal reimbursement on pharmacy payments, rebates, and the regulation of imported prescription drugs. Other issues included lobbying for audit reform on pharmacy benefit managers, according to a filing with the House Clerk’s office on July 20.

Pharmacy benefits managers include Medco Health Solutions Inc., based in Franklin Lakes, N.J., which saw a 14 percent jump in second-quarter profit to $356.9 million on a 10 percent boost in revenue to $16.41 billion. Other pharmacy benefit mangers include Express Scripts Inc., based in St. Louis, which saw second-quarter profit surge 50 percent to $289.9 million on a doubling of revenue to $11.29 billion.

Pharmacy Benefit Discounts Continue, But At Slower Pace

August 12, 2010 By: Nadia Category: HealthCare, Medtipster, Prescription News, Prescription Savings

www.Medtipster.com Source: Dow Jones Newswires, By Dinah Wisenberg Brin – 8.11.10

The U.S.’s big pharmacy benefit managers continue to offer clients better deals this year as they compete for business, but they don’t appear to be sliding into a frenzy of unreasonable pricing.

In the current “selling season,” when PBMs look to sign customers for the following year, discounts on new contracts have deepened by one or two percentage points, on average, from a year ago. While PBMs are still lowering their pricing, the pace is slower than a year ago, when PBMs were willing to expand discounts by as much as five percentage points, according to benefit consultants who guide employers on choosing a vendor.

It is unclear how the lower prices will impact margins next year at large PBMs like Medco Health Solutions Inc. (MHS), CVS Caremark Corp. (CVS) and Express Scripts Inc. (ESRX). The increased use of generic drugs, which lowers PBMs’ costs, allows them to be more flexible with prices. That accounts for some of the discount.

The big PBMs have reported lower margins this year, citing a variety of reasons. Medco, though, specifically mentioned lower pricing on renewing contracts, among other items.

PBMs “are taking a little bit of a hit to margin, not much, but they are taking one,” said Michael Jacobs, national clinical practice leader at Xerox Corp.’s (XRX) Buck Consultants. He said the companies have ways of making up elsewhere for client discounts — through greater operating efficiency, cost-shifting to members or raising prices on other drugs.

PBMs handle prescription-drug benefits for employers and health plans, negotiating pricing — including rebates and discounts — with drug makers and pharmacies. They also run their own profitable mail-order pharmacies. The competitive industry has come under increasing pressure to pass along rebates and discounts and improve transparency.

Currently, the industry is engaged in its selling season for 2011 contracts, with billions of dollars in new and renewing business up for grabs or already won.

“Pricing got more competitive this year,” said Kristin Begley, national pharmacy practice leader at benefits consultant Hewitt Associates Inc. (HEW), who didn’t see much switching among her large, national clients, many of which contract with CVS Caremark or Medco.

Rebates got better, and there were “overall better deals across the board,” Begley said. Also, she said, most Hewitt client bids this year required full transparency on pricing structure, with PBMs earning an administrative fee and making money on mail-order while forgoing a margin on drugs dispensed at retail.

PBMs are offering clients better discounts on generic drugs, said David Dross, partner and managed pharmacy practice leader at the Marsh & McLennan Cos. (MMC) Mercer LLC consulting business. Dross added that he has seen some bigger discounts for brand-name drugs as well, although underlying costs on branded drugs generally are increasing.

PBM managements have indicated pricing trends are rational, even though a Sanford C. Bernstein & Co. employer survey earlier this summer suggested a “notable deterioration of the PBM pricing environment,” with more than 40% of respondents noting a decrease in prices.

“Our pricing disciplines have been applied consistently for the past several years as well as going forward to 2011,” Medco spokesman Lowell Weiner said. Medco CEO David Snow Jr., who earlier this year noted instances of aggressive pricing, said last month that he was feeling more comfortable with the competitive marketplace.

Meanwhile, Express Scripts CEO George Paz has said that while “pricing has always been extremely aggressive,” the company uses clinical tools to help drive out costs.

Per Lofberg, who heads CVS Caremark’s PBM operation, recently told analysts that pricing is “intensely competitive like it always … has been, but it’s fundamentally very similar to the past. When plans go out for bid, they are always looking for better economics, and that’s a very important part of the negotiations.”

John Malley, eastern region pharmacy practice leader at Towers Watson & Co. (TW), said PBM pricing isn’t irrational, although it is changing in structure so that players offer better pricing without necessarily losing margin.

“So more simply put, the level of discounts off prescription drugs is not that different between last year and this year, but the overall value of this year’s deals, all in, is better than last year” for the clients, Malley said.

Pricing will become less important a competitive factor as more drugs go generic, Mercer’s Dross predicted. PBMs already are trying to differentiate their clinical offerings, which aim to close gaps in care, customize prescriptions based on genetics and improve compliance to produce better health outcomes and lower costs.

Drug Makers Raised Prices Sharply in ’09

April 20, 2010 By: Nadia Category: Medtipster, Prescription News

www.Medtipster.com Source: Wall Street Journal, April 20, 2010

Drug companies sharply raised prices last year, ahead of increased rebates they must pay to Medicaid and other expenses tied to the federal health overhaul passed last month.

Prices for brand-name pharmaceuticals rose 9.1% last year, the biggest increase in at least a decade, according to pharmacy-benefit manager Express Scripts Inc., which included the recent number in its annual drug-trend report. The boost for specialty drugs, a category that is largely biotech products, was even sharper: 11.5%. In 2008, the price rise had been 7.4% for traditional pharmaceuticals, and 9.4% for specialty drugs.

Some individual drugs saw double-digit increases in the first quarter compared with a year earlier, including 12.1% on Zetia, a cholesterol drug from Merck & Co., and 13.6% for Cymbalta, an antidepressant from Eli Lilly & Co., according to data from Credit Suisse. The firm, which tracks the pricing of brand-name drugs made by the biggest U.S. manufacturers, found wholesale prices went up 7.8% in the first quarter, compared with a year earlier.

The increases were “exacerbated by the health-care reform debate,” said Steve Miller, senior vice president and chief medical officer of Express Scripts, although drug makers disputed that notion.

An Eli Lilly spokesman said its pricing policies last year weren’t affected by the health bill, and such decisions take into account benefits for patients as well as “marketplace conditions and recovery of our R&D costs.”

But Lilly did caution shareholders Monday that rebates to Medicaid, as well as other provisions in the law, would lower its 2010 revenue by $350 million to $400 million, and 2011 revenue by $600 million to $700 million.

A Merck spokesman said its “price adjustments are independent of health-care reform,” and are instead driven by an approach that aims to “ensure patient access and enable Merck to invest in research and development.”

Zetia’s pricing for most of last year was controlled by an independent joint venture involving Merck and Schering-Plough Corp., which are now merged, the company added. Both Merck and Lilly said the pricing numbers didn’t reflect the effects of rebates and discounts granted to many health-care payers.

The health law will also require the drug industry to knock off half the price paid by Medicare beneficiaries in their “doughnut hole” coverage gap starting in 2011, among other expenses, though the pharmaceutical companies will also benefit from an influx of newly insured consumers that will kick in later.

The effects of the price increases on overall drug spending are being tempered by the availability and aggressive promotion of cheaper generic alternatives, among other factors.

In its report, which reflects the drug benefits it administers for corporate clients, Express Scripts also said drug spending went up only 6.4% in 2009, slightly more than last year but lower than five years earlier.

Indeed, a report this month from IMS Health said that the number of prescriptions dispensed for generic drugs rose 5.9% last year, but those for branded drugs fell 7.6%.

Overall spending on prescription drugs rose just 5.1% according to IMS, which looks at different data than Express Scripts.

Another reason for price increases is probably that insurers, employers and pharmacy-benefit managers have become “much more difficult gatekeepers,” said Credit Suisse analyst Catherine Arnold. Discounts and rebates used to promote branded drugs precipitate price increases to offset those marketing costs.

Also, as drugs go generic, companies mark up the prices of the brand-name versions, assuming that patients who stick with those “are the people for whom price doesn’t matter,” said Mark McClellan, who formerly oversaw the Medicare and Medicaid programs for the Bush administration and is now at the Brookings Institution.

Express Scripts, which is based in St. Louis and has 36 million people in its commercial client group, said the actual drug-spending increase — as opposed to the price markup — was 4.8% for traditional pharmaceuticals, to $800.23 per member per year, and 19.5% in specialty drugs, to $111.10 per member per year.

Big increases in spending occurred in several areas, including diabetes, driven by the growing number of people diagnosed with the disease, and antiviral drugs, due to flu concerns.

The pharmacy-benefit manager said its clients were able to help keep the increase in check through use of generics and other moves. But it argued that, across the entire U.S. market, there could be significantly greater health-care savings tied to how drugs are taken.

The company estimated the savings at $163 billion a year, which could be achieved with greater use of generics and better adherence by patients prescribed drugs, both tactics that Express Scripts pitches to clients as among services it can provide.

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