PBMs, Pricing Spreads & Medicare Transparency

Pharmacy benefit managers would have to disclose the markups they charge insurers for prescription medicines under a new rule that is being proposed by the Centers for Medicare & Medicaid Services. The reason for reporting the heretofore unknown spreads is to promote transparency, according to a CMS filing that discusses proposed revisions to the Medicare Advantage program regulations.

The spread is the difference between what PBMs pay a pharmacy and what is charged health plans, which goes unreported. "We believe that implementing section 6005 of the Affordable Care Act, which requires us to collect PBM spread amounts, would establish necessary transparency related to entities that provide pharmacy benefits management services to Part D sponsors," CMS wrote in its filing.

The proposal, by the way, comes just as Express Scripts agreed to buy its rival, Medco Health Solutions, for $29 billion, a deal that has spawned controversy over concerns that the combined PBM will too easily dominate the market, especially for specialty meds such as biologics (see this). However, PBMs have long generated concern about pricing as well and the CMS proposal is clearly an attempt to demystify a process that has vexed consumer advocates.

The rule would also require PBMs to report the percentage of Medicare prescriptions they fill through their own mail-order pharmacies, compared with those run by retail pharmacies, according to Bloomberg News, which first reported the CMS proposal. PBMs would also have to disclose the amount and types of rebates and discounts from drugmakers and the percentage of generics dispensed.

The US won’t publicly disclose the information, according to the CMS filing. Medicare, by the way, spends about $62 billion a year on prescription drug benefits. The Pharmaceutical Care Management Association, a trade group for PBMs, has defended keeping spreads secret as an incentive for its members to negotiate lower prices. We have sought comment and will update you accordingly.

Here is the CMS proposal

pills pic thx to anolobb on flickr