PBMs Allegedly Blur Definitions of ‘Brand’ and ‘Generic’ Drugs, Drug Benefit News Reports, Costing Pharmaceutical Payers Millions of Dollars
Atlantic Information Services, Inc. (AIS) - May 21, 2008 - Washington, DC

A “generic” or “brand” drug may not always be what it seems in the Byzantine world of pharmacy benefit management (PBM) contracting, according to an exclusive story in the May 16 issue of Atlantic Information Services, Inc.’s Drug Benefit News (DBN). Go to http://www.aishealth.com/pdf/dbn051608pr.pdf to read the full article.

Industry insiders contend that PBMs intentionally manipulate the definitions of “brand drugs” and “generic drugs” to suit their financial interests. Health plans and employer groups, meanwhile, are largely unaware that this purported scheme could be costing them millions of extra dollars per year on their drug spend, pharmaceutical consultants and auditors tell DBN in exclusive interviews.

“This issue is not on the radar screen of payers, consulting firms or anyone but the PBMs that are taking advantage of contract ambiguities to make a lot of money,” says Linda Cahn, president of Pharmacy Benefit Consultants and an attorney who has reviewed hundreds of PBM contracts and litigated against PBMs.

PBMs frequently write contracts that lack any definition of “brand drug” and “generic drug,” Cahn tells DBN. Or the contracts may contain such ambiguous definitions that PBMs can manipulate the terms to achieve financial gains that should flow to the pharmaceutical payer, she adds.

By miscategorizing drugs, Cahn asserts, PBMs achieve a number of financial aims. These include charging brand prices for generic products, retaining rebates for brand drugs by calling them generics, and misstating a health plan’s generic drug utilization rate.

PBM auditors say such practices could be costing pharmaceutical payers several percentage points on their total annual drug costs. Drug spending of large employers can total many millions of dollars per year.

Large PBMs contacted for comment by DBN say they follow accepted industry standards in defining drugs as brand or generic, and work with clients on addressing any concerns about the classification.

For more details on how categorizing a drug as a brand or a generic is integral to a PBM’s determination of its payment formulas and performance guarantees, as well as information on what pharmaceutical payers can do to avoid potential mischaracterizations, visit http://www.aishealth.com/pdf/dbn051608pr.pdf to read this DBN article in its entirety.

Additional information on this topic will be discussed on June 12 (1:00 p.m.-2:30 p.m. Eastern time) during the AIS audioconference titled “How to Lower Rx Costs in PBM Contracts: Strategies for Health Plans and Employers.” For more information, call 800-521-4323.

Drug Benefit News is a biweekly subscription newsletter, published by Atlantic Information Services, Inc. that provides timely news and data on the business of pharmaceuticals ... and practical cost management strategies from experts throughout the industry. For more information, visit http://www.aishealth.com/Products/NewsDBN.html.

ABOUT AIS For more than 20 years, Atlantic Information Services, Inc. (AIS) has been serving the business of regulatory information needs of tens of thousands of health plan managers, hospital executives and other business leaders in health care. AIS publishes industry-leading business newsletters, books and reports, directories and databases, looseleafs and Web subscription services … and dozens of audioconferences and live conferences each year. Visit http://www.aishealth.com for more information.

CONTACT: Neal Learner of Atlantic Information Services, Inc. at (202) 775-9008, ext. 3056 or nlearner@aispub.com.

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