SOURCE: Pharmaceutical Strategies Group

Pharmaceutical Strategies Group

July 31, 2009 16:30 ET

National Survey Indicates Marketplace Unease With Upcoming Drug Pricing Changes

PLANO, TX--(Marketwire - July 31, 2009) - Pharmaceutical Strategies Group (PSG), a Texas-based pharmacy benefit consulting firm, released today the results of a national survey focused on gauging marketplace-readiness for upcoming changes to how prescription medications are priced. The survey follows on the heels of a federal court settlement this past Spring which lead First DataBank (FDB) and Medi-Span, drug database providers, to first adjust and then eventually discontinue publishing their Average Wholesale Price (AWP) index. A vast majority of pharmacy benefit managers (PBMs) currently base their pricing to clients on AWP but have since been working to introduce alternative drug pricing methodologies to assure "economic neutrality" for pharmacy payers across the country once these changes take place.

Taken during a two-week period in late June, PSG's survey includes responses from employers, managed care organizations, government organizations, and unions. The results indicate a general level of dissatisfaction with the lack of clarity and conciseness in the communications received from PBMs. In addition, the majority of survey participants are concerned that the changes proposed by their PBM will result in increased costs of their pharmacy benefit.

Numerous factors appear to contribute to this sense of unease. First, even though the PBMs are not the cause of the problem, their clients generally expect them to respond to these changes in a way that does not result in increased cost or risk to the client. Nevertheless, the survey results indicate a widespread perception by payers of lack of adequate communication from PBMs to their clients concerning precisely how they plan to deal with the issue. The result is increased anxiety for payers and an insufficient amount of time to review the potential impact of changes on their organizations. Another factor creating concern is the difficulty in precisely defining and communicating "economic neutrality." The concept is intended to mean that no party will benefit from changes being dictated by the court or by FDB's and Medi-Span's decision to eventually eliminate AWP. In some cases, the PBMs have brought in third parties to validate that the solution offered to their clients is neutral. Even so, the calculations required to demonstrate neutrality are highly complex and survey respondents generally recognized there will be additional expenses involved in validating PBM claims. There is also uncertainty as to whether or not economic neutrality will continue to be achieved over time.

Payers are also concerned about the shift away from AWP. While AWP has generally been regarded to be flawed by experts throughout the drug benefit industry for a variety of reasons (including lack of transparency on how the index is derived and its lack of correlation to the actual acquisition cost of a drug), AWP has historically offered a consistent way to compare drug pricing between certain time periods as well as between the various PBMs. This consistency will be lost as PBMs introduce "home grown" replacements for the index. PBMs appear to be developing a variety of approaches to AWP rollback and replacement, resulting in a fragmented approach to drug pricing which, in turn, greatly increases complexity in comparing PBM pricing arrangements and auditing contract compliance and PBM performance, as well as having the potential for increasing financial risk and costs for payers.

The full results of PSG's drug pricing survey can be accessed here: http://www.psgconsults.com/2009_PSG_Drug_Pricing_Survey_Report.pdf

About Pharmaceutical Strategies Group

PSG assists plan sponsors in designing and managing programs that maximize the value of pharmaceuticals in their population. The strategies employed by PSG allow plan sponsors to gain immediate control over their pharmacy benefit expenditures, while positioning their program to meet future pharmacy benefit challenges.

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