States consider creating their own PBM

Drug Cost Management Report, Jan, 2003

Some state legislators who are unhappy with the way pharmacy plans operate have decided to create their own nonprofit PBM. A group of states known as the National Legislative Association on Prescription Drug Prices (NLAPDP) is trying to set up its own national, nonprofit, PBM-type organization to purchase prescription drugs.

The group intends to develop a pharmacy benefit package that will address some of the controversial issues surrounding prescription benefits--namely transparency, quality and pricing.

The group (formerly known as the Northeast Legislative Association on Prescription Drug Prices) is made up of legislators from the states of Connecticut, Maine, Massachusetts, New Hampshire, New York, Pennsylvania, Rhode Island and Vermont, plus local lawmakers in the District of Columbia. The Heinz Foundation has agreed to help with the start-up funding of the venture.

The coalition is attempting to garner support from retail pharmacists--another sector that feels it has gotten the short end of the stick from PBMs. But First Albany analyst Kevin Berg points out that since a main component of the group's strategy is mail-order purchase of drugs from Canada, retail pharmacists are unlikely to support the effort.

In fact, the Pharmacists Society of the State of New York (PSSNY) issued a press release to announce its opposition to the creation of a nonprofit PBM by the multi-state group. The PSSNY opposes any program that facilitates the importation, without FDA oversight, of drugs.

From the biotech sector, the New York Biotechnology Association (NYBA) and the Lifescience Industry Organization of Oregon (LIO) came out against NLAPDP's plan to rely on "evidence-based" drug evaluation. This strategy is designed to eliminate some of the controversy arising from the privately negotiated pricing, discounts, and rebates that make up the bulk of drug purchasing contracts in the current PBM market.

While many pharmacy benefit participants and policy-makers join NLAPDP in calling for more transparency regarding PBM deals with manufacturers, PBMs say that maintaining confidentiality enhances the level of competition among drugs in the same class.

The NYBA believes that the "evidence-based" plan promoted by the NLAPDP is scientifically flawed and would inhibit innovation in biotechnology. "In practice, physicians in the field discover the utility of new drugs, which ultimately increases patient health and lowers overall health care costs," says Ron Cohen, MD, chairman of the board of NYBA and CEO of ACORDA Therapeutics.

If the effort does succeed in getting off the ground, it has neither the funding nor the infrastructure to administer a pharmacy plan, says PBM industry analyst Kevin Berg with First Albany. Therefore, it will have to outsource the bulk of the work--in all likelihood to a PBM.

For more information contact Craig Burridge, PSSNY, (518) 869-6595; Jeff Lipps, LIOO, (503) 312-5704; Ron Cohen, MD, NYBA, (914) 347-4300.