Managed Care - September 2008 - (Page 30)

Don’t Get Caught By PBMs’ MAC Mousetraps References to maximum allowable prices in contracts between plans and PBMs need to be scrutinized, since things are not always what they seem By Linda J. Cahn or most of the world, the letters MAC conjure up a Big Mac — the inviting supersized hamburger that people love but enjoy at their peril. But for health plans providing prescription drug coverage, the acronym represents an incomprehensible concept inserted into prescription coverage contracts by pharmaceutical benefit management companies (PBMs). Unfortunately, unbeknownst to most health plans, this MAC is far more pernicious than any oversized hamburger. In fact, PBMs insert the MAC concept into contracts in three ways to relieve health plans of millions in savings that they would otherwise obtain from using generic drugs over branded drugs. I’ll describe how PBMs use three contract ploys — the MAC definition, MAC pricing formulas, and so-called MAC guarantees — to deprive health plans of most savings on generics, and then I’ll tell you what health plans must do to avoid the MAC mousetraps. MAC. While the definitions may at first appear to be entirely benign, they are anything but. For example, here are two typical MAC definitions found in hundreds of PBM/client contracts: MAC or “maximum allowable cost” means the unit price established by the PBM for a multisource drug included on PBM’s MAC drug lists developed for PBM’s clients, which may be amended from time to time by PBM, in its sole discretion. MAC, the maximum allowable cost, consists of a list of off-patent drugs subject to maximumallowable-cost payment schedules developed or selected by PBM. The payment schedules specify the maximum unit ingredient cost payable by client for drugs on the MAC list. The MAC list and payment schedules are frequently updated. F MAC definitions Every PBM/client contract begins with many definitions, including a definition for the term Linda J. Cahn, a graduate of Princeton University and Hofstra University Law School and a member of the New York and New Jersey bars, is the president of Pharmacy Benefit Consultants, a nationwide consulting company that assists insurance companies, corporations, unions, and government entities in improving their PBM contracts and conducting better PBM RFPs. Pharmacy Benefit Consultants can be reached at 973-975-0900. While seemingly benign, these definitions actually allow PBMs to accomplish many things. A PBM can create different MAC lists for different clients. A PBM can include on — or exclude from — its MAC lists any drugs the PBM wants to include or exclude. For example, a PBM is free to include 500 drugs — or 2,000 drugs—and equally free to leave thousands of drugs off its MAC lists. A PBM can change the drugs it includes — or excludes — whenever it wants to do so. A PBM can select any prices it wants as the MAC prices for the drugs on its MAC Lists. For example, for a generic drug that actually costs $4, a PBM can create a MAC price of $40, or a MAC price of $100 (or any other price it wants). 30 MANAGED CARE / SEPTEMBER 2008

Table of Contents Feed for the Digital Edition of Managed Care - September 2008

Managed Care - September 2008 Editor’s Memo Contents Legislation & Regulation News and Commentary Medication Management Compensation Monitor Archimedes Lends Hippocrates a Hand Some Other Predictive Modeling Programs Messing With Medicare Advantage The Trouble With MAC MedPAC’s Suggestions Sound Familiar The Leader in Patient Satisfaction Formulary Files Plan Watch Tomorrow’s Medicine Ad Index Outlook

Managed Care - September 2008

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