June 2010

Pharmacy transparency

By Dennis Sponer

SORM’s pharmacy benefits management (PBM) service provider, ScripNet, values the issue of transparency in its relationships with customers and partners. Recently, transparency received attention in the national health care reform legislation.

Although it won’t affect workers’ compensation in a direct way as it will health care plans in the Exchange or Medicare Part D, the call for PBM transparency made its way into both Senate and House health care reform bills.

The House bill called for “(C) An estimate of the aggregate average payment per prescription under the contract received from pharmaceutical manufacturers, including all rebates, discounts, prices concessions, or administrative, and other payments from pharmaceutical manufacturers, and a description of the types of payments, and the amount of these payments that were shared with the plan.” The House bill also called for “(E) Information on the percentage and number of cases under the contract in which individuals were switched because of PBM policies or at the direct or indirect control of the PBM from a prescribed drug that had a lower cost for the QHBP (Qualified Health Benefit Plan) offering entity to a drug that had a higher cost.”

The Senate bill was more explicit in its call for “(3) The aggregate amount of the difference between the amount the health benefits plan pays the PBM and the amount that the PBM pays retail pharmacies.”

In the latter part of 2009, SORM selected ScripNet through a comprehensive competitive bidding process for PBM services. During its previous 9-year history of providing customer service and medical cost containment services to the state workers’ compensation program, ScripNet demonstrated its transparency in cost-plus pricing and its win-win business arrangement. SORM and ScripNet work together to contain pharmacy costs by taking advantage of negotiated drug discounts from ScripNet’s pharmacy network, the use of formularies to ensure the appropriateness of drugs, and programs that promote generic over brand name drugs, to name a few. The SORM-ScripNet relationship demonstrates that both quality health care and cost containment can be advanced in a fully competitive environment.

Yet transparency provisions in both congressional bills imply that there is no competition or incentive for medical cost containment. In fact, transparency language in the health care reform bills is more appropriate for a “vendor monopoly” environment, where customers have no buying/negotiating power themselves. In addition, provisions in the House bill that call for tracking incidences where a PBM policy switches a customer from a lower cost (e.g. generic) to a higher cost (brand) are contrary to the basic value proposition of a PBM, that of cost containment. While there may be some PBMs that engage in these types of practices, carriers and self-insured organizations have the ultimate responsibility to keep their vendors honest and forthright through competitive bidding processes that result in transparency in both pricing and contracts and programs that contain costs. As a case in point, the SORM-ScripNet relationship can be seen as a model for the health care industry to foster competition, cost containment, and transparency, without the need for government intervention.