Here we are approaching the one-year anniversary (September 26, 2010) of the effective date of the McKesson AWP settlement, and unfortunately, little has changed. At WBC (wbcbaltimore.com) we have followed this case from the get-go, through negotiation and settlement. We have helped our clients 
with their direct participation in the class action settlement, as well as active involvement in evaluating their PBM. The question remains: where’s the new pricing standard that was anticipated?
As a refresher, part of the settlement involved the publishing of AWP by First DataBank, who along with McKesson Corp., were defendants in the action. One of the remedies was for First DataBank to cease publication of this standard within 2 years of the effective date of the settlement. Many thought a new benchmark would be introduced in short order to replace the perceived gap in a reliable and representative alternative. Much was written about whether WAC, AMP or ASP would fill the void. Several PBMs altered their benchmark and have adopted WAC in their pricing proposals. So what happens? The vast majority of PBMs simply adjusted their pricing discounts to reflect a lower AWP. They tauted it as “cost-neutral” to the client. What they didn’t say was the adjustment. i.e. reduction in cost, did not save the client any money. They did, however, remind clients that they weren’t going to be charged more!
To further delay the wheels of change, Wolters Kluwer, the publisher of Medispan, which is the largest competitor to First DataBank’s AWP’s Blue Book, has announced that they will continue to publish AWP “until relevant industry or governmental organizations develop a viable, generally accepted alternative.” Interestingly, Medispan was a party in the settlement and had agreed to stop publishing by September 26, 2011. Let’s see if Judge Saris, the judge who heard the case and approved the settlement, has anything to say.
There really is no national standard that has gained traction as a suitable alternative. A committee that was commissioned by the National Council for Prescription Drug Programs recommended that WAC be used as a replacement benchmark for single-source drugs, while no recommendation was made to cover multi-source products. In our opinion, the best bet for future guidance seems to reside with our friends at CMS. They prefer AMP, and plan to begin publishing AMP pricing in October. We believe that if and when this occurs, the rest of the industry will fall into line within a year. It is a big “if” however, since the retail pharmacy associations don’t seem to want any part of more transparent pricing, at least as it applies to their pharmacy setting. When CMS announced a recent plan to produce pricing surveys and publish results with acquisition cost pricing, they were faced with a firestorm of resistance from the pharmacy lobbies. Litigation has been promised if CMS continues to pursue this course, so we’ll have to wait and see what happens. It may be a harbinger of things to come related to PBM pricing benchmarks. Stay tuned!
Top 10 Trends for 2010/2011 and Beyond:
At one time, the larger networks were considered a competitive advantage, providing maximum convenience to enrolled populations. The realtiy is that very few plans need the “convenience” of 57,000+ participating pharmacies. In some metropolitan areas, there are literally pharmacy options on every corner. Most plans can meet the needs of their employee/members with a 15,000-18,000 store network, and in some cases, substantially less. The benefit of losing this excess baggage are better discounts and lower net pricing.
Ask most pharmacy benefit plan sponsors to name 5 PBMs and most come up shy at around three. Not surprisingly, this market dominance has earned the exalted stratification of becoming known as “The Big Three.” Repositioning the aforementioned question to “Name the Big Three” and most plan sponsors fill in the blanks,not with Bird, Parish and McHale, but with Medco, CVS/Caremark and Express Scripts. They are shocked to learn that there are actually over 60 PBMs currently competing for their business. What’s more shocking is when the data shows that the PBM troika they thought they knew turns out to be the wrong answer. Here’s the facts regarding market share by covered members and total scripts:
It really can put them in the position of the 800-pound gorilla. As consultant “artists” we need to read beyond the standard checklist and get to the heart of the matter, i.e., will the vendor provide our client with not only great pricing, but provide adequate protection in the event of things going south for the plan and its members as the result of PBM error, negligence or malfeasance.