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May
13

Explaining pharmacy pricing, part 4

Do you have any idea if you are paying your PBM what you should?

Work comp payers’ PBM pricing is based on AWP; typically it is a percentage below AWP. Brand drugs are discounted 10-16%, and generic pricing is typically below AWP -40% .

The PBM is making its money on the “spread”; the difference between what it pays the pharmacy, and what it charges you.

Your PBM contracts with retail pharmacies, chains, food and drug purveyors (think Walmart), and independent pharmacies. In some cases third party billers are also contracted, along with physician dispensers and mail order pharmacies.

Here’s where it gets funky.

The PBM’s contracted rates with those pharmacies are all over the place and may even vary by region or drug. That’s fine; you are getting a discount, and the PBM is betting it will – overall – make a profit.

That is, it’s fine IF your average discount is equal to or better than what you were promised.

Reality is, very few workers’ comp payers review their PBM’s bills to make sure that the average discount is what they were promised. 

Workers’ comp insurers and TPAs audit claims, case management performance, reserves, bill review, hospital bills, network discounts, legal bills…pretty much everything BUT pharmacy.

The Russians said it best.

That is NOT to say PBMs purposely mess with the numbers/bills/codes to increase their reimbursement. Rather, like any entity, mistakes can be made, lapses occur, updates lag.

Unfortunately, in the audits we’ve seen these errors usually benefit the PBM.

What does this mean for you?

If you’re looking to ensure you’re paying what you should, let’s talk.


One thought on “Explaining pharmacy pricing, part 4”

  1. For the medical plan I manage (not WC) We do an annual audit of our PBM contract – it is very thorough and the first two showed very few errors and the errors were minor. Given the uproar over PBMs recently I have found the audits provide some reassurance to our trustees, independent auditor, and counsel.

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Joe Paduda is the principal of Health Strategy Associates

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