Pharmacy Product Info

Friday, March 28, 2008

Formulary Competition

Pharmaceutical manufacturers formulate payments to PBMs that involve the prices that plan sponsors and members pay for drugs dispensed under the plans administered by the PBMs. Pharmaceutical manufacturers compute these payments as a percentage of the price of the prescription dispensed.On average, PBM study participants acknowledged total payments from pharmaceutical manufacturers of $5.22 per equal-sized mail and retail brand-drug prescriptions dispensed in 2002. The average payment increased 21.5 percent to $6.34 in 2003. The extent to which contracts between PBMs and their plan sponsor clients explicitly shared these payments varied by plan sponsor.

PBMs received the majority of their total payments for a limited number of single-source brand drugs. In 2003, each study participants top 25 brand drugs accounted for approximately 71 percent of the participants total payments received, on average.The pharmaceutical manufacturer-PBM agreements examined by the FTC staff showed that manufacturers readily raised and lowered allowance levels for each of their drug products as competition developed in the drugs therapeutic class. Allowance levels were higher for drugs on restrictive formularies and when there were several competing drugs in a therapeutic class.The manufacturer-PBM contracts generally did not provide higher allowance levels for drugs dispensed through PBM-owned mail-order pharmacies as compared to retail pharmacies.

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