The Brand Only PBM

A few years ago, I would have argued that PBMs could one day simply cover generic drugs and not cover brand drugs.  With most therapy classes (excluding specialty) having multiple generic options, this seemed possible.  Already, some companies have generic fill rates which are above 70% (meaning that 70% of all prescriptions filled are filled with a generic).

But, now I am wondering the opposite.  If retailers drop generic drugs to $4 and make them available in 90-day supplies for $10 (see Wal-Mart), do you need to PBM in the middle managing those claims?

There are of course several questions to be answered:

  • What percentage of the total generics filled in the market are available at these prices?
  • What happens with new generics that typically have a higher price for the first 6-months?
  • Do these claims still get processed so that they show up in the PBM claims database to be used for drug-drug interactions?

And, Wal-Mart upped the ante here including over-the-counter drugs which typically aren’t covered by insurance.  We aren’t there yet, but it poses an interesting question about the future breadth of coverage and what the implications could be.  Today, most PBMs don’t make money on the brand drugs other than perhaps an administrative fee paid by the pharmaceutical manufacturer for those drugs that are on formulary.  (Something in the range of $1-$5 per claim depending on the cost of the drug and the contract.)

It would turn the market upside down also since a lot of the intervention programs today are in place to drive use of generics as first-line therapy so if they weren’t part of the benefit then the programs wouldn’t have as much value.

Just a thought.  BTW – I have asked the Wal-Mart people to answer the last question above for me since I am interested in whether this is a real issue today or whether most of these claims get paid out using the U&C (usual and customary) field and logic in the POS (point-of-sale) system (i.e., they process as paid claims not cash claims).

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