Will MLR Definition Affect PBMs…Maybe

I’ve been getting this question a lot lately. Honestly, I haven’t heard a convincing argument either way (but I also haven’t had time to read the definitions in detail).

From what I can tell, there are a few factors:

1. Will the definition allow mail order claims to be fully processed as medical costs? If yes, this may be a huge boost from retail-to-mail programs across the industry and could change the market for PBAs (Pharmacy Benefit Administrators) that don’t have their own mail order pharmacies. If it clearly doesn’t allow affiliates (or captive PBMs) of the managed care company to get the same treatment, that could certainly create some interesting discussions about pharmacy assets at places like Cigna, Humana, Kaiser, or Regence. Would they get more value out of long term deals like Aetna has with CVS Caremark?
2. Will the definition only force retail claims to be broken out into ingredient costs and administrative costs? If so, would you see the death of administrative fees and dispensing fees? If dispensing fees disappeared, would you see discounts going back to where they were a few years ago (i.e., just a shifting of profit)? Or, would you see a whole different contracting strategy where retailers would work to contact directly (like the Walgreens and Wal-Mart deals with Caterpillar) with payers and employers and would that allow them to get the same treatment as mail order? If that happened, that would change the spread model at PBMs and could be a boost for PBAs.

There are also broader implications to payers about decisions to insource other things like disease management or medication therapy management (MTM). If they get better treatment by outsourcing them, would PBMs jump into that market more than they are today? It would be an interesting discussion. Certainly, the big PBMs have lots of cash and there are several standalone DM companies.