Managed Care - January 2009 - (Page 31)

Don’t Get Trapped By PBMs’ Rebate Labeling Games Transparency in contracting is a great thing, but it takes vigilance to keep it from clouding over By Linda J. Cahn “ manufacturer and directly attributable to the utilization of certain pharmaceuticals by members. Rebates do not include administrative fees, software, or data fees paid by pharmaceutical manufacturers to PBM. The PBM may receive fees or other compensation from pharmaceutical companies for services rendered and property provided to pharmaceutical companies, including without limitation administrative fees not exceeding three percent of the AWP [average wholesale price] of the products dispensed across PBM’s book of business. In addition, the PBM’s mail service and specialty pharmacies receive discounts or rebates from pharmaceutical companies that are attributable to or based on product purchases by the PBM’s mail order or specialty pharmacies. The term rebates does not include the fees, compensation, and discounts described in this section. hat’s in a name? That which we call a rose by any other name would smell as sweet.” Juliet was speaking of • Romeo, and expressing a universal truth. Unfortunately, pharmacy benefit management companies (PBMs) would like the world to believe otherwise, at least when thinking about PBMs’ rebates. For them, calling a rebate by another name means that it is something other than a rebate. Therefore, PBMs need not pass through any third-party money that they choose not to call a rebate. Accordingly, it is imperative that health plans and other PBM clients understand Linda J. Cahn PBMs’ rebate labeling games. Moreover, it is critical that these clients learn how to end all rebate manipulations, since PBMs are siphoning off billions of dollars of clients’ potential savings, and This language may appear benign, but it is anyclients aren’t even aware that they are doing so. thing but. If a PBM enters into contracts with drug manufacturers and chooses to give rebates another name — like administrative fees or health manPBMs’ contracts with clients agement fees or grants — the PBM will arguably Most PBM/client contracts contain core laneliminate its obligation to pass through the finanguage in which PBMs define the term “rebates” and cial benefits to its clients. agree to pass through all or most rebates to their Moreover, a PBM can deprive its clients of reclients. Here are three examples: bates by ensuring the rebates are paid on a basis that • Rebate means the rebates, including base and market share rebates, collected by the PBM in Linda J. Cahn, a graduate of Princeton Univerits capacity as a group purchasing organization sity and Hofstra Law School and a member of the for the client from various pharmaceutical New York and New Jersey bars, is the president of companies that are attributable to prescripPharmacy Benefit Consultants, a nationwide contions dispensed to members, but specifically sulting company that assists insurance companies, excluding any rebates paid with respect to uticorporations, unions, and government entities in lization of specialty drugs. improving their PBM contracts and • Rebates means retrospective rebates or disconducting better PBM RFPs. Pharmacy Benefit counts which are paid to the PBM pursuant to the terms of a contract with a pharmaceutical Consultants can be reached at 973-975-0900. W JANUARY 2009 / MANAGED CARE 31

Table of Contents Feed for the Digital Edition of Managed Care - January 2009

Managed Care - January 2009 Editor's Memo Contents Legislation & Regulation News and Commentary Medication Management Compensation Monitor Health Care's Disruptive Innovations Q&A With Clayton Christensen 'Disruption' May Be Plans' Best Bet Avoid the PBM Rebate Trap HealthPartners Puts Diabetes on Notice Formulary Files Plan Watch Tomorrow's Medicine Ad Index Outlook Unmet Needs in the Management of Plaque Psoriasis Impact of RSV: Implications for Managed Care

Managed Care - January 2009

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