Prescription Drug Benefits and Consumer Behaviors

Prescription Drug Benefits

A prescription drug benefit is an important part of a health benefit plan that pays for our prescription drugs when we need them. A good prescription drug benefit can keep us out of the hospital, emergency room and surgery. It helps keep health care costs down. Pharmacy benefits are the third largest health care expenditure, after hospital and outpatient medical care, and has historically risen faster than the other two benefits for many years.

A pharmacy benefit manager (PBM) is a third party administrator of prescription drug benefits. They are responsible for processing and paying prescription drug claims and for negotiating discounts and rebates with drug manufacturers.

More than 200 million Americans receive drug benefits that are administered by a PBM. It is the buying power of these 200 million Americans that allows a PBM to negotiate lower prices for prescription drugs. A PBM typically requires use of a mail service pharmacy as a means of reducing cost. PBMs use clinical tools to help reduce physician prescribing errors and medication errors, and to improve patient compliance with medications and patient health outcomes.

Neighborhood Pharmacy

Express Scripts

Express Scripts, Inc is one of the largest PBMs in North America. In spite of costs associated with acquiring Next Rx membership and integrating these new members into its IT systems, Express Scripts, Inc. (ESRX) announced 2010 second quarter net income of $307.3 million. Gross profit for the 2nd quarter was $777.7 million, up 31% from 2009. The company was able to buy back $6 million of its own shares and re-pay $180 million of long term debt. Investors enjoyed a 2 for 1 stock split.

“Our solid second quarter results are a testament to our focus on making the use of prescription drugs safe and more affordable,” stated George Paz, president, chief executive officer and chairman. “We are making advances in driving pharmacy related waste out of the healthcare system, while improving health outcomes. We remain positive on the underlying trends and opportunities in our space and remain confident in our ability to improve health outcomes and drive out waste – meeting the needs of our clients, lowering costs and generating exceptional shareholder value,” (1)

Express Scripts is using Consumerology, the application of behavioral health sciences to health care, to influence consumer behavior toward achieving better healthcare outcomes and reducing costs. Through understanding human behavior and decision making, Express Scripts claims to have identified how five consumer behaviors contribute to a waste of $163 billion/year on health care. These consumer behaviors all relate to varying degrees of compliance with taking medications as prescribed and how receptive consumers are to using mail service pharmacies rather than their neighborhood pharmacy. By targeting these consumer behaviors to reduce expense, it is anticipated that in ten years two trillion dollars will be saved in health care spending.


PBMs have been successful in reducing pharmacy benefit costs by 25% to 45% compared with unmanaged drug costs, depending on how aggressively the PBM manages the benefit.  The goal of the PBM is to achieve the best clinical, economic and humanistic outcome, while maintaining customer satisfaction.

 

Mary's Story


Sometimes a thing can look good on paper and in the context it is intended. Reality has a way of making a thing look different and a broader context can expose some weaknesses. Let’s look at this PBM success story from the perspective of a very dissatisfied consumer, who we’ll call Mary.


Mary paid more this year for her health insurance premium than ever before, and received significantly less coverage than ever before. Mary possesses some of the “predatory” behaviors identified by Consumerology. She likes to think she is in charge of her medical care and she likes the convenience of her local pharmacy and the interaction with her pharmacist that she has enjoyed for 15 years. Her PBM has decided it knows better than she does how to manage her health conditions and medications, and insists that she use a mail service pharmacy.


One day, as Mary was returning from her doctor visit, where she had been treated for pneumonia and asthma following a bout with the flu, she went to her local pharmacy to fill prescriptions; to include a refill for her emergency inhaler. Her inhaler was almost empty and she had not received her mail order yet. When she got to the pharmacy, she was told her inhaler would not be covered by her insurance because she had already refilled it through the mail pharmacy. Mary was too sick and too weak to argue with the PBM and decided that if her inhaler ran out, she would call 911 or go to the emergency room. “That will teach them,” she thought as she drove home.


She knew from previous encounters with the PBM that the person on the phone was using an algorithm and was not clinically trained. In fact, the person deciding whether or not she can have the medication prescribed by her physician was not a pharmacist or a physician. She also recognized that the individual was practicing advanced behavioral health techniques without a license and without having to adhere to ethical practice guidelines. In fact, the individual was very motivated to reduce costs in the way prescribed by her company, so that she could get a piece of that stock market action.


Mary had truly expected that her inhaler would arrive in the afternoon mail anyway. When it didn’t she began to plan a strategy for rationing her inhaler - another predatory behavior! She was instructed to use 2 puffs four times a day. Instead, she would only use the inhaler when it was absolutely necessary. She was new to using an inhaler, so wasn’t sure how to tell how much was left, or even if she was inhaling blanks already. Her refill order didn’t come the next day either.


Mary began to wonder what would happen if 200 million Americans decided they don’t want their PBM to be that aggressive, intrusive and controlling. After all, who is saving money? Mary surely isn’t. All the money saved from pharmacy health care waste went to the PBM and its shareholders. Even the health insurance company only made a 3% profit for the year. It seems the money must have moved from pharmaceutical companies to PBMs.


Mary has a friend who had a problem with her PBM as well. They began to talk. And their friends began to talk. One of them wrote an article about it and it was tweeted and stumbled upon millions of times. It was speculated that George Paz was an overall decent human being, and decided to right these wrongs. He avoided the fate of being called in to a congressional shaming session like so many of his contemporaries. He began by teaching all his employees the importance of customer satisfaction and the importance of providing high quality pharmacy benefits.

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Comments 12 comments

billyaustindillon profile image

billyaustindillon 6 years ago

Very helpful - an amazing number that 200 million Americans get prescription drug benefits - America really does have to get healthier doesn't it - that is two thirds of the population!


kimh039 profile image

kimh039 6 years ago Author

that's 200 million that have a PBM - which is about everyone who works for Fortune 500 companies or the government or are on Medicaid. Everyone else who has prescription drug coverage has a non managed benefit. Thanks for being the first to post a comment BAD. I thought I was the only one up at this hour!


vrbmft profile image

vrbmft 6 years ago from Yucaipa, California

I ran into Mary's problem after eye surgery and altho the pharmacy calculated the actual number of drops I would need, I don't think they take into account how many times one misses!! At any rate, I prayed over the drops and they multiplied!! I finally had the doctor write a new perscription with different directions which gave me more drops per month. The price is right, but then sometimes you get into issues re brand vs generic and the "generic" is not always as generic as claimed, at least so I have heard. With regard to my eye drops, the doctor said, If I wanted you to take the generic, I would have prescribed the generic. So I don'tknow. I am now taking a generic drop which for several months was literally in the same identical packaging as the brand. So go figure.

Thanks for an informative hub and I guess the conclusion is George does care!

Vern


kimh039 profile image

kimh039 6 years ago Author

A friend of mine spends about $1000/mo on her meds. For financial reasons, she wanted to fill her prescriptions early but couldn't. She ended up not having enough money when it was time to refill, and didn't. She suffered severe symptoms that kept her from being able to function until she got re-stabilized. She has a lot of conditions, and all I know is that when I had lunch with her she shook so much she couldn't hold her fork. The next week she was back to normal. With the exception of narcotics, consumers need to have more say in how we manage our medications. I think George will do the right thing.


Artoflegendindia 6 years ago

your hub is a very informative.I know about the drugs benefits.


kimh039 profile image

kimh039 6 years ago Author

Thank you Artoflegendindia, for taking your time to read and post a comment.


Micky Dee profile image

Micky Dee 6 years ago

Thanks again for important info. The drug companies are rough on us.


kimh039 profile image

kimh039 6 years ago Author

Yeah, Micky Dee. I don't think everyone is clicking the link to view the videos about consumerology, but some of the assumptions about human behavior read like justifications to be intrusive and aggressive..... a topic for another hub perhaps. Anyway. Thank you Micky Dee.


shimla profile image

shimla 6 years ago

Thanks for this article - important observations!


kimh039 profile image

kimh039 6 years ago Author

Thanks so much shimla, for taking the time to read and comment.


vocalcoach profile image

vocalcoach 5 years ago from Nashville Tn.

This is such a good article. I have learned some things I never knew about consumer behaviors. Bookmarking this to send on to family and friends. I read it twice - something I rarely do. :) vocalcoach


kimh039 profile image

kimh039 5 years ago Author

Thanks vocal coach! Twice?! I found the video on consumerology to be offensive; the idea that a PBM knows better than I do what's good for me! Maybe most people do prefer decisions to be made for them, but to me that's the opposite of healthy. I might listen to it again and see if I still have the same reaction. It's been awhile. I really appreciate your taking the time to read twice and comment:) kimh039

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