Thursday, August 04, 2005

Keeping Prices Low by Increasing Costs. Wha?

PBMs [pharmacy benefits managers] act as liaisons between employers and pharmacies, handling the details of employee drug benefits and negotiating discounts with pharmacies.

PBMs argue that the competition in their industry actually keeps consumer costs down.


The firms that manage drug benefits for other companies pay pharmacies so little and charge employers so much that they're pushing up the costs for everyone, [Mark S. Riley, executive vice president for the Arkansas Pharmacists Association] said Wednesday.

...Reilly said a typical PBM might pay a pharmacy just $8 for dispensing 100 tablets to an ill worker but charge that ill worker's employer $20. The $12 difference - or "spread" - goes in the pocket of the PBM, he said.

What a scam. Insurance companies create a bureaucracy that shifts the profits of the pharmacy to the PBM.

Executives of large PBMs disagreed vehemently, saying their companies foster competition, which is the best way to keep prices down. They said the profit margin in their segment of the industry is just 1.2 percent.

Boo hoo. Doesn't that mean the profit margin for pharmacies is much, much smaller? Why should their segment of the industry exist, anyway? At any rate, PBMs are hurting mom-and-pop pharmacies.

"It's sad that we may be seeing the passing" of the small neighborhood pharmacy, [Ralph Pollock, chairman of the Colorado Association of Commerce and Industry's Business Council for Health Care Competition] said. "But if they can't compete, they can't compete. The market will work."

How does destroying small pharmacies (which benefits large, national pharmacies ::cough::walgreens::cough::) foster competition?

It's good to be the middle man (unless you're in a pick-up truck).

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