Quantifying a Pharmacy Benefit Manager (PBM) Fee-For-Service Business Model

Summary: Using CVS’s 2017 10-K reports to the SEC and its 2017 drug trend report, we convert its PBM segment (a.k.a. Caremark) reseller gross profits business model to a single transparent fee-for-service expressed in terms of dollars per member per year (PMPY).   The following table summarized our results: Our estimated FFS equivalent of $64 […]

CVS’s 2019 Formulary Removals – Negligent Handling Diabetes Test Strip Change

Summary Around the first week in August for the past four years, CVS has made an official announcement of its next year’s formulary changes. It posts these changes on its own websites. But that changed in 2018. During an August 8th 3Q2018 Earning Conference Call,  CVS said that 2019 formulary details would be available around […]

The Problem with CVS’s “Guaranteed Net Cost” PBM Business Model

Summary: Consider this meta:  CVS opaquely is substituting one opaque source of gross profits — guaranteed net cost markup — for another opaque source — retained rebates. The pharmacy benefit manager (PBM) CVS Caremark has offered its self-insured corporate clients an alternative business model called “Guaranteed Net Cost”.  The pricing scheme features 100% pass-through of […]

Will PBMs Behave Differently? CVS – Aetna Merger, Express Scripts – Cigna Merger

The Effect of Corporate Structure on Formulary Design: The Case of Large Insurance Companies Poster Presentation, ISPOR 10th Annual Meeting, Washington DC, May 2005 The Role of Pharmacy Benefit Managers in Formulary Design: Service Providers or Fiduciaries? Journal of Managed Care Pharmacy Vol. 10 No. 4 July/August 2004 pp 359-60 The Formulary Game (07/03) Hepatitis C […]

Insulin Drug Price Inflation: Racketeering or Perverse Competition?

    Summary We contend that recent insulin drug price inflation is a case of perverse competition rather than a case of illegal racketeering in violation of the RICO Act.   We will present the case that a now consolidated racketeering RICO lawsuit initiated by the law firm Hagens Berman has inverted the hierarchy of […]

Will Amazon’s Online Pharmacy Display Therapeutic Equivalents?

Postscript (12/2/2017)   Amazon is now the best hope for a consumer-directed pharmacy benefits website that “crosses the chasm” by suggesting lower cost therapeutic equivalents. It has been ten years since we wrote a paper on The Future of Consumer-Directed Pharmacy Benefits .  The possibility of consumer-directed health care got a new life in the mid-2000s […]

Biosimilars & Exclusive Dealing Antitrust Law: Pfizer (Inflectra) v J&J (Remicade)

Summary Following the generally accepted theories of the legal scholar Robert Bork and his Chicago School colleagues, vertical restraints such as exclusive dealing contracts are presumptively procompetitive and welfare-enhancing because it would be irrational for a buyer to exclude the lowest cost supplier.   On September 20, 2017, the drug manufacturer Pfizer filed a lawsuit […]

AbbVie’s Mavyret Drug Pricing: Disruptive to the Pharmacy Benefit Manager Business Model

Summary: AbbVie’s pricing for its new Hepatitis C Virus (HCV) drug Mavyret is disruptive to the current PBM business model because it forces the Big 3 PBMs to consider a drug for inclusion in their national formularies that is aligned with their clients interests — more cost-effective than Harvoni — but not aligned with their […]

Merck Data Discredits PBM-Sponsored Study of Brand Drug Price Inflation

Summary We present data supplied by the drug company Merck that discredits a study sponsored by the pharmacy benefit manager (PBM) trade association showing no correlation between PBM rebate rates and brand drug price inflation. Introduction The management of the prescription (Rx) drug benefit portion of health care plans has become the domain of contracted […]

Blame Pharmacy Benefit Managers (Not Pharma) For Driving Drug Price Inflation

Summary: We start with a review of the history of the opaque pharmacy benefit manager (PBM) reseller business model. We present our prior estimates of the distribution of PBM gross profits over the past decade showing that they have become dependent today on retained rebates from specialty drugs. Next, we present numbers showing how PBMs […]