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Executives from the big pharmacy benefit managers often cite high employer plan retention rates as evidence that the PBMs are popular with their customers.
Joe Shields, the founder and president of Transparency-Rx, a group for PBM startups, says the high PBM customer retention rates are a symptom of problems, not a sign of success.
Shields talked about why he thinks the current PBM plan retention rates are a poor quality indicator earlier this month at a session that the Fecderal Trade Commission and the U.S. Department of Justice held to hear the perspectives of researchers, pharmacists, PBM representatives and others about the state of competition in the U.S. prescription drug sector.
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The big PBMs have argued that pharmacists, drug manufacturing company executives and other industry players who are angry about the big PBMs' successful efforts to hold down prescription drug sector profit margins are behind the attacks on the big PBMs' bargaining and pricing strategies.
Tim Dube, a senior vice president at the Pharmaceutical Care Management Association, a group for PBMs, said at the FTC-DOJ meeting that the PBMs are the only part of the drug supply chain that's in the corner of patients and employer plan sponsors.
"PBMs are hired by plan sponsors to do many things to control the cost of drugs," Dube said. "Any argument that PBMs do the opposite and raise drug costs is simply implausible."
Drug manufacturers have used monopoly pricing power to set high prices for brand-name drugs and limit competition for years, Dube said.
Competition in the PBM services market is fierce, Dube added.
The smaller PBMs' perspective: Shields represents firms like Affirmed-Rx, EmpiRx, Liviniti, MedOne, Navitus, RxPreferred Benefits and Smith Rx that want to take business away from the big PBMs, by offering what they say are easier-to-understand contracts and pricing strategies.
He said at the FTC-DOJ meeting that the three biggest PBMs handle about 80% of U.S. prescriptions.
The big PBMs maintain their dominance partly by owning or controlling the "third-party administrators," or benefit plan administrators, and health care provider networks that serve employer-sponsored health plans, Shields said.
A company that serves as TPA for an employer's plan often tries to influence the employer's choice of PBM and may block or limit an employer's efforts to "carve out" pharmacy benefits and have a separate company manage those, Shields said.
Employers "that attempt to have a PBM carve-out to address out-of-control drug prices often face financial pay penalties or higher administrative fees, denial of access to integrated medical networks, and supplemental carve-out fees," Shields said.
Employers that try to use PBM carve-outs may also face "value loss fines," and they may get "medical rebate credits" for sticking with in-house PBMs if they switch to using a TPA's preferred PBM, Shields said.
In some cases, Shields said, brokers aligned with the big PBMs and the big TPAs reinforce the status quo by using narrowly written requests for proposals that shut out the smaller PBMs.
The barriers facing the smaller PBMs explain "how the largest PBMs and their competitors report Soviet-level retention rates of nearly 96% to 98%," Shields said.
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