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Medicare Rule Aims To Stop Pharmacy Benefit Manager Practice

Ruzanna Harutyunyan's picture

CMS officials on Tuesday said that the agency has finalized a new rule that will restrict an approach used by pharmacy benefit managers that inflates prescription drug costs for some Medicare beneficiaries, the Wall Street Journal reports.

PBMs negotiate prescription drug prices with pharmacies and reimburse them for medication purchased by patients, after which health insurers pay PBMs for administration of claims. Under the so-called lock-in approach, health insurers pay PBMs a set amount for claims regardless of the amount that they reimburse pharmacies for prescription drugs. The amount that health insurers pay PBMs for claims often exceeds the amount that they reimburse pharmacies for prescription drugs. PBMs in most cases do not disclose the amount of the difference, which the companies retain. The approach can cause Medicare beneficiaries to reach the so-called "doughnut hole" coverage gap earlier.

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The new rule, which will take effect on Jan. 1, 2010, will not ban the use of the approach. However, under the rule, CMS will use the amount that PBMs reimburse pharmacies for prescription drugs, rather than the amount that health insurers pay PBMs for claims, to determine medication costs for Medicare beneficiaries.

Acting CMS Administrator Kerry Weems said that the rule will "reduce what (patients) pay at the pharmacy counter." PBM Express Scripts raised concerns that the rule "will lead to higher costs and fewer competitive plan design choices over the long term" (Rubenstein, Wall Street Journal, 1/7).

Reprinted with permission from kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign up for email delivery at kaisernetwork.org/email . The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation. © 2007 Advisory Board Company and Kaiser Family Foundation. All rights reserved.