Cost Savings -- the Clearinghouse for the Future of Pharmacy Benefits

 Letter from Federal Trade Commission (March 7, 2014)

In this letter, the FTC staff warns the Centers for Medicare and Medicaid Services that proposed any willing pharmacy provisions threaten the effectiveness of selective contracting with pharmacies as a tool for lowering Medicare Part D costs.

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Biologic Drugs, Biosimilars, and Barriers to Entry
By Joanna Shepherd, Ph.D., Emory University School of Law

Health Matrix: Journal of Law-Medicine (forthcoming)

Congress has recently created a biosimilars approval pathway that would allow less expensive versions of biologic drugs to reach patients more quickly. However, original biologics manufacturers have sought to extend their monopoly profits by erecting various legal and regulatory barriers to entry. This paper discusses the various barriers and explores their market consequences.

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Report of the Alabama Medicaid Pharmacy Study Commission
Produced by Optumas for Donald E. Williamson, M.D., Chair

Alabama Medicaid Pharmacy Study Commission (December, 2013)

This report by the Alabama Governor’s Medicaid Pharmacy Study Commission concludes that if Alabama were to reform its Medicaid pharmacy program by contracting with a pharmacy benefit manager, the program could save as much as $35 million, or 6% of total pharmacy spending, in just a one-year period.

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The Impact of Preferred Pharmacy Networks on Federal Medicare Part D Costs, 2014-2023
By Stephen J. Kaczmarek, Andrea Sheldon, and David M. Liner of Milliman

Prepared for the Pharmaceutical Care Management Association (October 2013)

This actuarial report by Milliman finds Medicare Part D savings of as much as $9.3 billion over the next ten years from using preferred pharmacy networks.

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Selective Contracting in Prescription Drugs:  The Benefits of Pharmacy Networks
By Joanna Shepherd, Ph.D., Emory University School of Law
Minnesota Journal of Law, Science, & Technology (forthcoming)

In the article, which draws on economic theory, prior empirical studies, and data supplied by pharmacy benefit manager Express Scripts, Professor Shepherd finds that “pharmacy networks significantly lower the cost of prescription drugs for drug plans and consumers” while having “almost no effect on most consumers’ access to pharmacies.”

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The TRICARE Mail Order Pharmacy Program Was Cost Efficient and Adequate Dispensing Controls Were in Place
Department of Defense Inspector General (July, 2013).

This audit of the TRICARE Mail-Order Pharmacy program conducted by the Office of Inspector General (OIG) at the Department of Defense (DoD) found the TRICARE mail-order pharmacy program “more efficient and effective than retail programs, providing cost savings to DoD and potentially reducing health risks associated with dispensing incorrect pharmaceuticals.” The OIG notes that the TRICARE mail-order pharmacy program cost 16.7 percent less than prescriptions obtained through retail pharmacies.

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How Pharmacy Networks Could Save Medicare, Medicaid, and Commercial Payers $115 Billion
Pharmaceutical Care Management Association Report prepared by Visante (January, 2013).

This study examines the potential cost savings from using pharmacy networks.  While pharmacy networks have generated significant savings over the past twenty years, the study concludes there are even greater potential savings available through preferred and limited pharmacy network options.  The study finds that greater use of preferred and limited pharmacy networks could save payers an additional $115 billion over the next ten years.

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Federal Employees’ Health Benefits: Effects of Using Pharmacy Benefit Managers on Health Plans, Enrollees, and Pharmacies
General Accounting Office, (January 2003)

A 2003 U.S. General Accounting Office study evaluated the impact PBMs had on the Federal Employees Health Benefits Program (FEHBP). The study found that prescription drug costs decreased substantially as a result of increased PBM utilization. PBMs are shown to have generated an average price savings of 18% overall when comparing the prices of 14 brand name drug with and without PBM negotiations. The average prescription cost fell between 27% and 53% when it was filled through mail order. PBMs were also able to reduce prices by passing on rebates to the plans they cover, which resulted in annual savings of between 3% and 9% from 1998 to 2001.

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