The spread: pilot study of an undocumented source of pharmacy benefit manager revenue

OBJECTIVE: To document the difference between what pharmacy benefits management companies (PBMs) charge employers and what they pay dispensing pharmacies for the drug ingredient portion of prescription transactions (the "spre

DESIGN: Descriptive, cross-sectional study.

PARTICIPANTS: Two large employer groups, each of which used a different PBM, and six independent community pharmacies participating in these plans during 2002.

INTERVENTIONS: Two sets of financial records issued by each of two PBMs were reviewed retrospectively, including 129 line-item prescription transactions billed to the employer and the line-item transaction information that accompanies the PBM payment to the dispensing pharmacy.

MAIN OUTCOME MEASURE: Spread between drug ingredient cost billed to the employer by the PBM and drug ingredient cost paid to the dispensing pharmacy by the PBM for brand name versus generic drug products.

RESULTS: For both PBMs, the mean (+/- SD) spread was dollar 12.29 +/- 27.93 per prescription, with a range of -dollar 1.67 to dollar 201.65. Considering all 129 transactions, the mean spreads for brand name and generic medications were significantly different from one another, with mean (+/- SD) spreads of dollar 4.65 +/- 10.47 and dollar 23.45 +/- 39.47 per prescription, respectively. The two PBMs differed significantly in their spreads for brand name drugs (dollar 3.20 +/- 2.85 and dollar 5.93 +/- 14.12), but the spreads for generic products did not achieve statistical significance in absolute dollars (dollar 10.83 +/- 13.58 and dollar 31.74 +/- 48.11) because of their greater variation (as reflected in the larger standard deviations). However, the percentages difference for generic products differed significantly.

CONCLUSION: This pilot study indicates the possibility of substantial and widely varying differences in the spread and spread percentage between PBMs for brand name and generic medications. A more transparent business model for the PBM industry could produce better relations with PBM clients and business partners, including community pharmacies.