Flash Boys and the Pharmacy Benefit Industry: Much in common

By tthomas / On Apr.29.2014 / In Flash Boys, PBM Industry, PBM, / Width

Flash Boys:

Have you heard about Flash Boys: A Wall Street revolt? The book has intrigue, scandal, political posturing but unfortunately it also has bad news.  The bad news is savvy yet unscrupulous people on Wall Street have rigged the system to electronically pick the pockets of people on Main Street.  The good news is there is a small band of heroes that uncovers the secrets and form their own investment group that provides a place in the market for investors to get honest help and fair practice to manage their money.

Flash Boys and PBMs:

Just as with the Flash Boys story, the same type scenario is playing out every day in the Pharmacy Benefits Industry.  Some PBMs (Pharmacy Benefit Managers) have rigged the system so that employers and payers are paying more than they should for their pharmacy benefit. Hidden revenue streams, vague contract definitions, and using AWP (Average Wholesale Price) as a pricing mechanism can produce higher than needed cost for the pharmacy benefit. 

What is AWP?

AWP (or Ain’t What’s Paid) is similar to sticker price on a new car.  You can sorta use sticker price to compare car models, but you can’t really use AWP to determine what is actually being paid. An example is in Generic drugs where an entity can have a range of AWPs for the same drug between $ 1.00 and $ 10.00 per pill! So when you get 70 % off…. 70 % off what?

PBMs and PBM Consultants

To make matters even more complicated, PBMs may have an accomplice.  Some consultants and brokers choose and place PBM business with their clients based on marketing fees they are paid by PBMs.

Fortunately, and just like the Flash Boys story, there are heros here too.  Many Pharmacy Benefits consultants don’t take any money from PBMs for placing business. This means they can be totally unbiased and represent only their client’s best interests. Also, there are PBMs that take a much more straightforward approach to business. They do not utilize the hidden revenue streams, definitions are clear and precise and mail order is not promoted. Even though these PBMs may not be the largest in the industry, their costs to the client can be actually lower than even the largest players.

So find a hero in the pharmacy benefits business by working with a consultant that has NO FINANCIAL TIES TO ANY PBM. Also, look for a PBM that is willing to manage your pharmacy benefit without playing games to make money.