PBM-Owned Mail Order Pharmacies Cost Less

September 6, 2005 (PLANSPONSOR.com) - A report from the Federal Trade Commission (FTC) found that drugs purchased through mail-order pharmacies owned by Pharmacy Benefit Managers (PBM) cost less for plan sponsors than those purchased from mail-order or retail pharmacies not owned by PBM.

According to an FTC press release, the main findings of its study include:

  • For large PBMs, average total prices in 2002 and 2003 at PBM-owned mail-order pharmacies typically were lower than at mail-order pharmacies not owned by the large PBMs.
  • For retailer-owned PBMs, average total prices in 2002 and 2003 were lower for generic and multi-source brand drugs, but not single-source brand drugs, at PBM-owned mail-order pharmacies compared to mail-order pharmacies not owned by PBMs.
  • For a common basket of drugs dispensed in December 2003 with the same-size prescriptions, retail prices typically were higher than mail prices at both large PBMs and retailer-owned PBMs.
  • One reason for these differences is found in the contractual agreements that govern the relationship between the plan sponsor and the PBM. In the 26 PBM-plan sponsor contracts reviewed by the FTC staff, plan sponsors often secured more favorable pharmaceutical pricing for mail dispensing than for retail dispensing.
  • On average, PBM study participants received total payments from pharmaceutical manufacturers of $5.22 per equal-sized mail and retail brand-drug prescriptions dispensed in 2002. The average payment increased 21.5% to $6.34 in 2003. The extent to which contracts between PBMs and their plan sponsor clients explicitly shared these payments varied by plan sponsor.
  • The manufacturer-PBM contracts generally did not provide higher allowance levels for drugs dispensed through PBM-owned mail-order pharmacies as compared to retail pharmacies.
  • Most PBMs did not receive higher allowance levels for including a “bundle” of a manufacturer’s drugs on their formularies. In the few cases in which a PBM did receive higher allowance levels, the bundle was a small subset of the manufacturer’s drug products.

In its press release, the FTC points out that private-sector entities that offer prescription drug insurance coverage, such as employers, labor unions, and managed care companies, often hire pharmacy benefit managers (PBMs) to manage these insurance benefits. PBM’s use mail-order pharmacies to manage costs of prescription drugs and employers often encourage those employees on regular “maintenance” medications to take advantage of the discounts that 90-day prescriptions and high-volume mail-order pharmacies offer.

The study was conducted at the request of Congress in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. The full text of the FTC report is here .