PUTT President on Spread Pricing

October 17, 2013

Read Jason Wallace’s take on the recent Forbes Magazine piece which exposes Express Scripts spread pricing trickery. You can read the post on BenefitsPro.com and below:


Exposing PBMs’ spread pricing game

Groups advocating for increased transparency in the world of pharmacy benefits managers often cite “spread pricing” as one way PBMs drive up the cost of prescription drugs for employers and consumers. While the practice is often hard to expose, the upcoming issue of Fortune Magazine includes an in-depth piece, called “Painful prescription,” which does just that.

Reporter Katherine Eban uses the story of Meridian Health Systems — a former customer of the nation’s largest PBM, Express Scripts — to show the sometimes drastic difference in what PBMs charge patients to fill prescriptions and what they in turn pay pharmacies to dispense those prescriptions. This difference often leads to greater profits for the PBM and increased costs for the employer.

Robert Schenk, who oversees Meridian’s spending on employee medications, dug through the employer’s bills to discover just how rampant the practice was. One such example he found were charges for generic amoxicillin — Meridian was billed $92.53 when an employee filled the prescription, but Express Scripts paid only $26.91 to the pharmacy to fill the same prescription.

That amounts to a “spread” of $65.62 for only one prescription. In another instance, Meridian was billed $26.87 for a prescription of the antibiotic azithromycin. Express Scripts paid the pharmacy $5.19 to dispense the prescription, creating a spread of $21.68.

As this practice persisted, Meridian’s health benefits costs skyrocketed, all while Express Scripts continually promised savings. In the first year alone, Meridian’s prescription benefits costs increased by $1.3 million. It wasn’t long before Meridian switched to a more transparent PBM to handle their prescription benefits.

So how do PBMs get away with this practice, without most employers ever knowing?

The contracts that employers sign with PBMs are often confusing, full of industry jargon, and provide ample opportunities for the PBM to hide their costs. Employers may assume they’re paying pharmacy costs and administrative fees, but are unaware of the mark up that happens in the middle — the spread. As Schenk found, Meridian’s contract with Express Scripts contained no restrictions on PBM spreads.

As this article demonstrates, it’s more important than ever that those making benefits decisions are aware of these practices so they can ensure that they’re not being manipulated by the PBMs that are supposedly helping them. As PBMs continue to produce record profits, employers and patients suffer.

You can learn more about “spread pricing” and access resources on navigating PBM contracts at Pharmacists United for Truth and Transparency’s website, www.truthrx.org.