The financial agreement Rx Navigation: who pays what, when,

More than $ 200 billion is spent annually on pharmaceuticals in the United States, but less is known about how these billions of dollars are distributed as prescribed move through the buying process.

Many plan sponsors feel intimidated by the operational and financial activities that surround the complex prescription benefit programs. How the price is determined for prescription drugs can be cooked in four influencers:

1. The market demand for drugs and competition in the market.

2. The price of the pharmacy benefit manager negotiates to pay the manufacturer of the drug.

3. The price paid to pharmacies for dispensing drugs.

4. The price that the sponsor agrees to pay the PBM prescription for the administration of their benefit.

Manufacturers set the price (also known as average wholesale price or AWP) for drugs. Prices influencers exclusivity of the product, research and development costs, market demand, competitive environment and willingness to quickly capture market share.

As new drugs or other struck the pipeline, the protection of the brand of a drug expires, and / or become generic terms, the price of a drug may change order. In 2008, nine drug patents expire, allowing the free market for the production of generic equivalents and reduce the price dramatically that the manufacturer could obtain for the original product or brand.

Once the AWP of a drug is established, the manufacturer to consider a number of other factors that contribute May encourage them to make tariff concessions in the form of discounts and other manufacturer incentives, such as rebates and / or bonuses based on market share gains.

These incentives vary widely, depending on the aggressiveness of the manufacturer wants to be. PBM with a high volume of use for a particular drug in May receive larger discounts than others pbms with a low volume of use. The success of pbms are effective in enhancing their volumes programs and patients to achieve even deeper reductions.

Generic drugs are generally price a single formula known as the maximum allowable cost, which provides a limit on the price of a PBM is willing to pay a drug to pharmacies.

Then, the PBM is to negotiate aggressively with pricing structures, the national chain pharmacies and retailers and / or mail service providers. These distribution channels are paid for their services through reimbursements and fees established. Pbms, as part of their overall management of pharmacy benefits, May mark these taxes, the creation of the spread of prices. Fees vary depending on the structure of retail pharmacies and mail order.

The client generally or PBM contracts with pharmacies and pharmacies in the chain to create a network of providers who agree to provide drugs to registered members. For this service, the retailer receives a benefit of the drug as well as a waiver of fees.

The PBM mark May as the price of charging the client a higher rate for fresh ingredients and / or distribution costs as the cost of the PBM is required to pay at the pharmacy. The price difference depends on the contractual agreement between the PBM and the plan sponsor, and this may be a point of negotiation.

Many employers allow or require workers to receive their drugs through a mail-order service.

Many own their own pbms mail-order services, while others outsource this function. Nevertheless, the aim is to bypass the chain retailer in the financial and effectively become the distributor of the drug. Therefore, the revenue stream through the operation of the PBM mail service rather than a retailer, generating income for the add PBM.

Because drugs are usually delivered within 90 days, increases, the developer can see cost savings in the form of bulk purchasing and distribution efficiency. In many cases, the employer is asked to subsidize copays for employees to help offset costs.

If the postal service remains an option for maintenance drugs, the employer is likely to have fewer problems with employee satisfaction. However, if it is mandatory for maintenance drugs, plan sponsors should carefully consider the level of the employee's return, they are willing to pay for cost savings.

A PBM should be incentivized to act in the name of the sponsor and should have sufficient flexibility to meet the needs of the population.

Tips for Employers

Employers can take several measures to influence the cost of medicines:

* Work closely with their PBM to establish a real design advantage. Work with a PBM that can help to develop effective models that promote cost-effective overall behavior and create efficiencies. Employee training is an essential element of any plan of the pharmacy. A PBM may provide the tools and training to help workers make better informed decisions. A localized approach allows you to benefit from the economy and the willingness to do business locally.

* Find ways to reduce health care costs through schemes which are based on the evidence and evaluated at regular intervals. A design plan is based is shown by the drugs on the right to third parties the right cost.

Regular evaluation of the benefit should occur, including network pharmacy and forms, so that adjustments can be made to keep costs in line with business objectives. Understanding how pharmacy mail order May or May not the right person company goals.

* Get training on the flow of money pharmacy and how determined. Expect a PBM to explain the variables in the cost of the plan, how to optimize costs and increase the accountability of members and health.

* Study the incentives that will help change the attitudes of employees. For example, participation in a wellness program that enhances or stabilizes a chronic disease can result in lower copays for participants. Employers could affect significantly lower or no copays and copays on generic drugs. It is a good idea to have the deterrent effect for employees who choose more expensive therapies. The aim is to encourage behaviors that lead to greater adherence of drugs and lifestyles, which can lower the promoter of the health care system.

Positive trends in drug expenditures

Drug costs are under way in May, but not as much as before.

The annual growth of spending on prescription drugs averaged 9.9% from 1997 to 2007 but has slowed since 2003, falling to 1.6% in 2007, the lowest growth since 1974, according to a study published in the journal Health Affairs, in December 2008.

More patent expirations, increased generic use and fewer new products have contributed to this trend, the authors report.

You will be pleased to know that the employers' efforts, such as the creation of levels in the pharmaceutical industry benefits to encourage workers to use generic drugs at lower cost, have borne fruit.

"The increase in the extent and speed of penetration of generic drugs has led to substantial savings for buyers," the authors state.

More specifically, "the daily cost of medication in all products of this category decreased by 32% for lipid regulators in the years following the generic entry, 32% for bisphosphonates [Treatment of osteoporosis] 42% for selective inhibitors of serotonin reuptake [to treat depression and anxiety], and 20% for calcium channel blockers [to treat high blood pressure]. "

In recent years, there has been a remarkable passage of drugs prescribed mainly by primary care physicians and especially to those prescribed by specialist doctors.

In 2007, the first five primary care based therapeutic classes (in dollars) are regulators of fat, acid pump inhibitors, respiratory agents, antidepressants and oral antidiabetics.

Specialist therapeutic classes of drugs included drugs against cancer, antipsychotics, anti-epileptic drugs and self-agents.

In addition, vaccines, once neglected sector, have recently become much more important, "noted the authors.

The study concludes on a positive note: "For taxpayers and consumers, health spending outlook is more optimistic than many fear. Costs of prescription pharmaceutical products - an important segment of health care - are increasing very slowly or even declining. Unless circumstances change unexpectedly in the near future, this trend will continue, "the authors predict.

Jack McClurg is the CEO of HealthTrans, a pharmacy benefit manager in Greenwood Village, Colorado