This is Part 2 of a several part series on how employers are losing in the game to pay fair and reasonable prices for their employees’ prescriptions. Part 1 can be found here: https://www.linkedin.com/pulse/pbms-misaligned-incentives-curtis-colbert

Perpetual Mail order

Do you ever wonder why plan designs offer two months for the price of three for mail order? PBMs absolutely love these standing orders once they are established.

One of the reasons is the recurring revenue stream, as most own the pharmacy. Stopping the order is quite a feat in most cases. Once they have your credit card or ACH information, the prescription will keep coming. Why? Your physician will be contacted towards the end of the supply and unfortunately, the typical fee-for-service physician is so busy seeing their 35+ patients a day, they just sign the authorization continuing the cycle. Prescriptions will continue to arrive whether you need them or not.

Repackaging and Replacing

Repackaging and replacing is another generous profit center for mail order pharmacies. The PBM’s in-house pharmacy buys a large quantity of a drug from the manufacturer and then breaks it down into smaller sizes.

Why does this matter? Now that it’s repackaged, they will use a different Average Wholesale Price (AWP) but a greater discount percentage to make you think that mail order is great deal. The only problem is this new AWP could (will) end up being 150% higher or more. It’s a great sleight of hand to make the option enticing in a spreadsheet yet costs the plan considerably more. Ask your PBM if they are using a reporting service for their repricing and demand the data used for mail order. If you get stonewalled, it’s time to look elsewhere.

AWP Spreadsheeting

In this example, the AWP for a name brand drug at a retail pharmacy could be $400, less the 20% plus the $1.33 dispensing fee, for a net of $321.33. Once it’s repackaged and repriced by the mail order pharmacy, the new AWP is now $600. Take the 24.5% discount and waive the dispensing fee to arrive at $453. Mail order’s total cost is 41% more! This manipulation cannot be discovered by the review of a spreadsheet proposal. Thorough contract review and continuous raw data analysis on a monthly basis will protect you and the assets of your plan. Do you have risk controls in place to prevent this from happening?