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PBMs, Specialized Formularies Reduce Managed Care Prescription Costs

Pharmacy benefit managers (PBMs) and specially designed formularies can reduce prescription drug costs for managed care payers.

PBMs can help managed care payers reduce prescription drug costs and increase generic use.

Source: Thinkstock

By Thomas Beaton

- Pharmacy benefit managers (PBMs) with specialized drug formularies can help managed care payers significantly reduce prescription drug costs, according to new research published in the Journal of Managed Care and Speciality Pharmacy.

The study, which was sponsored by CVS Health, found that managed care payers contracted with PBMs had access to tailored drug formularies that helped lower overall prescription costs. As a result, PBMs improved generic dispensing rates and helped managed care payers provide cost-effective drug alternatives.

Conversely, managed care payers that did not work with a PBM experienced lower generic dispensing rates and saw annual per-member per-year prescription costs increase by $38.04.

The researchers estimate that prescription drug spending increased nationally by $16 million for managed care programs that moved away from a managed care preferred drug list (MCPDL) to a uniform preferred drug list (UPDL).

The researchers suggested that UPDLs, which are fee-for-service models controlled by state governments, don’t allow payers in managed care programs to benefit from the advantages provided by PBMs.

PBMs traditionally manage MCPDLs and use their ability to negotiate with pharmaceutical companies in order to lower drug prices.

UPDL participation can also lead to higher generic drug costs for managed care payers, the researchers found.

Managed care payers in UPDL models spent $7 million more on generic drugs after switching from an MCPDL in the first quarter of 2017. The team asserted that uniform drug formularies prevent payers and state governments from using generic drugs as a way to reduce prescription costs.

State Medicaid programs that maintained an MCPDL saved $322 million on annual costs for mental health prescriptions, the team found. States and managed care payers operating in UPDLs may need to leverage other opportunities or strategies to generate similar savings.

“The data also showed that to achieve the same level of cost-savings in state-managed Medicaid formularies as in the managed care model, considerable supplemental rebates from pharmaceutical manufacturers would be necessary,” the team said.

The research follows state efforts to move away from PBM-designed formularies and purchasing models to save on Medicaid prescription costs via additional rebates.

Recently, Oklahoma received approval from CMS that allows managed care payers to negotiate supplemental drug rebates from pharmaceutical companies. Managed care payers in Oklahoma receive additional rebates based on a drug’s performance and ability to improve patient outcomes.

However, the researchers concluded that state efforts to leverage additional drug rebates may not be enough to offset rising prescription costs or increase generic utilization without help from PBMs.

“Our results suggest that states’ consideration of supplemental rebates’ attractiveness should be balanced with the cost implications of generic dispensing rate declines,” the team said.

CVS Health warned that managed care payers are more likely to increase spending by transitioning to UPDLs and similar models. The organization emphasized the need for PBMs to reduce increasing prescription costs in the Medicaid program.

“This research underscores the vital role that pharmacy benefit managers play in helping to deliver important and affordable care to the millions of Americans enrolled in Medicaid while also delivering value to taxpayers in states across the country,” said Troyen A. Brennan, M.D., Executive Vice President and Chief Medical Officer, CVS Health.

“As Medicaid spending continues to increase and states look for opportunities to rein in drug costs under the program, our research proves that the managed care model continues to be an efficient and effective approach.”

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