First and Largest Spread Pricing Lawsuit Settlement
As part of a settlement called the “first and largest in the country secured by a state attorney general against a pharmacy benefit manager,” Centene will pay a total of over 143.8 million dollars to the states of Ohio and Michigan, although Centene denies any liability. In the lawsuits, Centene and its pharmacy benefit manager (PBM) subsidiaries were accused of spread pricing – the artificial inflation of prescription drug prices.
Spread pricing is one of the primary means to profit for most PBMs. According to CMS.gov (the Centers for Medicare & Medicaid Services), spread pricing occurs when health plans contract with [PBMs] to manage their prescription drug benefits, and PBMs keep a portion of the amount paid to them by the health plans for prescription drugs instead of passing the full payments on to pharmacies. CMS administrator, Seema Verma, admits, “The market for prescription drugs is convoluted and opaque.”
Typically, choosing to use spread pricing is up to the health plan (in the case of Medicaid, it is up to the state). Some health plans choose to pay the price the PBM has negotiated with the pharmacies in addition to a separate administrative fee for services provided. Alternately, some clients choose to contract with their PBM for predictable drug costs for the year and then the client allows the PBM to keep the difference between this fixed amount and the amount paid to the pharmacy that dispenses the drugs. What clients may not realize is exactly how much of a profit spread pricing often creates for PBMs.
In a recent report commissioned by the Massachusetts Independent Pharmacists Association, lack of PBM oversight has cost Massachusetts residents tens of millions of dollars in unnecessary taxes while individuals and businesses have also faced inflated costs. The report claims that PBMs are sometimes charging insurers up to twice the recommended cost for prescriptions in certain spread pricing scenarios.
Shop Smart for your PBM – Employers Have Options
“The health plan sponsor hiring a PBM always has the final say on contract terms; PBMs don’t choose spread-pricing contracts,” said Greg Lopes, a spokesman for the Pharmaceutical Care Management Association. So, what is the silver lining? Choice. Clients have a choice of PBM as well as the final decision on contract terms.
With this backdrop, it becomes clear that proactive vetting of your PBM is a prudent first step in avoiding inflated costs that will inevitably affect your bottom line. Araya’s transparent cost model simplifies prescription drug management and inserts confidence into the business decisions made with and on behalf of clients. Spread pricing is not part of Araya’s pass-through business model, which passes all prescription discounts and rebates on to clients.
