September 19, 2011
(Washington, DC)— Pharmacy benefit managers (PBMs) will save consumers and payers almost $2 trillion in prescription drug costs – a 35 percent savings – over the next decade, according to new research from Visante. The research also indicates that another $550 billion could be saved if payers used the full array of savings-tools that PBMs offer.
“PBMs are the one industry in America to have met the three-fold challenge posed by a generation of policymakers and consumer advocates: to simultaneously reduce costs, expand access, and improve the quality of health benefits,” said Pharmaceutical Care Management Association (PCMA) President and CEO Mark Merritt. “PBMs also empower businesses to create jobs. When PBMs save employers even 1% in prescription drug costs, businesses can re-deploy that savings to cover the cost of 20,000 jobs.”
Major Findings from the Visante study include:
- Average PBM Savings: From 2012 to 2021, PBMs will save plan sponsors and consumers almost $2 trillion, or about 35%, compared with drug expenditures made without pharmacy benefit management. Of the $2 trillion, commercial plan sponsors and their members will save $1.3 trillion; Medicare Part D and its beneficiaries, $700 billion.
- Range of PBM Savings: Available PBM savings for individual plan sponsors can range from 20% for those that make limited use of PBM tools to 50% for those that adopt best practices recommended by PBMs.
- Additional Savings with Best Practices: If all plan sponsors adopt PBM-recommended best practices, projected prescription drug expenditures could fall by an additional $550 billion over the next decade. Of the $550 billion in additional PBM savings, commercial plan sponsors and their members could save $360 billion; Medicare Part D and its beneficiaries, $190 billion.
- Lost Savings if PBM Tools are Limited: Limiting PBM tools could increase projected prescription drug costs by more than $550 billion over the next decade. Drug costs could rise by more than $360 billion in the commercial sector and more than $190 billion in Medicare Part D.
- PBM Savings and Jobs: Annual savings generated by PBMs for the commercial sector will cover the cost of more than 700,000 jobs in 2012. By adopting PBM-recommended best practices, commercial plan sponsors could cover the cost of more than 200,000 additional jobs next year. If PBM tools are limited, lost savings to the commercial sector could equal the cost of more than 200,000 jobs. Put another way, each 1% decrease in prescription drug expenditures covers the cost of 20,000 jobs nationwide.
PBM tools focus on five primary categories that reduce drug trend:
- Negotiating Rebates from Drug Manufacturers: PBMs negotiate rebates from manufacturers of brand drugs that compete with therapeutically similar brands and generics. Manufacturers typically provide a rebate if their product is “preferred,” which means it is assigned a copay lower than competing products.
- Negotiating Discounts from Drugstores: Retail pharmacies provide discounts to be included in a plan’s pharmacy network. The more selective the network, the greater the discount, since each pharmacy will gain business.
- Offering More Affordable Pharmacy Channels: Mail-service and specialty pharmacy channels typically give plan sponsors deeper discounts than do retail pharmacies. These channels also help encourage the use of preferred products for additional savings.
- Encouraging Use of Generics and Affordable Brands: PBMs use several tools to encourage the use of generic drugs and preferred brands. These include: formularies and tiered cost sharing, prior authorization and step therapy protocols, generic incentives, consumer education, and physician outreach. As PBMs and plan sponsors strive for greater savings, drug mix becomes even more important.
- Reducing Waste and Improving Adherence: PBMs use Drug Utilization Review (DUR) to reduce waste such as polypharmacy and implement patient adherence programs to help patients stick to their prescription regimens. Both programs improve clinical outcomes and influence prescription volume and expenditures.