Sell Your Captive PBM – Why?

June 16, 2008 by George Van Antwerp 2 Comments

I was a little surprised by the quote from Lisa Gill from JPMorgan Chase about why health plans should sell their in-house PBMs (Pharmacy Benefit Management):

“I think it makes a lot of sense for PBMs [pharmacy benefit managers] to be sold or spun off as a stand-alone business. The only time it will make sense for a managed care company to actually own a PBM is after they move to real-time [medical] claims processing. And that’s not going to happen near term.”

Maybe I am missing some context here, but I don’t understand.  Why would you have a “captive” PBM (i.e., owned by a managed care company)?

  • Able to align total healthcare interests (e.g., drive Rx usage up to manage ER visits)
  • No conflicts of interest (real or perceived)
  • Able to keep margins of the PBMs (look at the stocks of Medco, Express Scripts, and CVS Caremark)
  • Manage the customer service experience

What does any of this have to do with real-time claims access?

Why would you use a standalone PBM?  (Again an easy decision)

  • Economies of scale on rebates
  • Mail order pharmacy efficiencies
  • Manage capital outlays
  • Get a dedicated focus on pharmacy which as only 10% of the total healthcare spend will be a stepchild under a managed care plan no matter what
  • Best practices being leveraged across companies

And, we all know from bidding on RFPs that managed care companies use this service to win business talking about the integrated solution and underwriting pharmacy with medical.

If you understand the rationale here, help me out.

Books / Articles, Healthcare, Managed Care, Marketing / Communications, PBM / Pharmacy, Value Propositions

2 Responses to “Sell Your Captive PBM – Why?”

  1. Unknown's avatar
    Dan Reply June 17, 2008 at 12:54 pm

    PBMs use to be owned by big pharma which had some rather obvious conflicts of interest, and that is why there are owned by managed care companies now. Furthermore, and due to your health insurance providing PBMs at the same time, Doctors are getting paid around 100 dollars every time they prescribe or switch on of thier patients from a branded med to a generic.

    The whole system is about looking for ways to deny complete health care to others that may be needed.

    [Just for the record, I am not familiar with any time that physicians have been paid for prescribing or switching their patients. – George]

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  1. Time To Sell? « Patient Centric Healthcare - February 25, 2009

    […] Managed Care, PBM / Pharmacy, Value Propositions. trackback There is always debate about captive PBMs (i.e., those owned by a managed care company).  In theory, I have always argued that they should […]

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