Magazine article Drug Topics

Room to Grow

Magazine article Drug Topics

Room to Grow

Article excerpt

Is Medicaid the last holdout for PBMs?

Pharmacy benefit managers (PBMs), with few markets left to enter, have had limited luck in courting one of the biggest holdouts-state Medicaid pharmacy programs.

Why the resistance? Medicaid insiders say that state Medicaid programs like to use PBMs to process pharmacy claims and conduct drug utilization reviews but not to manage their formulary. They say the states' ability to extract best-price drug rebates from drug manufacturers would be lost if PBMs were allowed to use their own formularies to collect their own pharmacy rebates from the manufacturers.

Charles Callihan, v.p.-operations, Pharmacy Advantage System, an Atlanta PBM that helps administer Georgia's Medicaid pharmacy program, told Drug Topics that the difference in rebate amounts can be significant between PBMs and state Medicaid programs. "PBMs can get rebates, but those rebates run about 4%-5%, while Medicaid's rebates run about 20% of the cost of goods."

Mary Finch, associate directorpharmacy program, Alabama Medicaid Agency, Montgomery, told Drug Topics that a new pharmacy plan design for her state's Medicaid pharmacy program calls for the use of a PBM for administrative services such as processing drug claims and conducting drug utilization reviews. But, she added, the plan does not allow the PBM to set up its own restricted formulary and enforce it on a capitated basis.

"You lose your rebate if you allow for a capitated plan [that permits] the PBM to develop its own formulary. If you do not capitate and do not allow the PBM to develop its own formulary, you can still get your rebate," she explained. …

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