Understanding Competition in U.S. Prescription Drug Markets: Entry and Supply Chain Dynamics #00381

Submission Number:
Todd Stephens
Initiative Name:
Understanding Competition in U.S. Prescription Drug Markets: Entry and Supply Chain Dynamics
I respectfully urge the FTC to take a very close look at the dynamics of the pricing strategies for pharmacy benefit managers (PBM's). While their value proposition to clients is to reduce pharmacy costs and provide an array of related services, their reimbursement schemes to providers seems to prove otherwise. PBM's have multiple revenue streams but stand to gain the most profit from "spread" pricing and post-adjudication fees charged to pharmacies. Spread pricing entails charging one fee to plan sponsors while reimbursing the pharmacy significantly less, oftentimes below the provider's acquisition cost. Post-adjudication fees include direct and indirect remuneration fees (DIR's) that vary from fixed fees to a percentage of the prescription price. These costs are not realized by the provider until AFTER the claim has been marked as paid. The PBM's added these fees in an attempt to "hide" this additional revenue stream from plan sponsors, providers and regulators. The PBM also has the authority to manipulate their formulary (medication list and price paid) at virtually any time, rendering the provider helpless to maintain margin or predict costs, due to restrictive contract language and "gag clauses". This contractual "take it or leave it" language limits a provider's ability to question or negotiate with the PBM and further restricts the provider from exposing the details of these actions publicly. As a community pharmacy, our goal is to focus on our customer's health and to ensure they are taking their medications as directed. Our desire is simple; to receive reasonable reimbursement, over our cost, for such services. Unfortunately, due to the practices mentioned above, we are struggling to do so. Thank you, in advance, for your consideration.