“Do not trust the horse, Trojans. Whatever it is, I fear the Greeks even when they bring gifts” – Virgil’s Aeneid, Book 2, 19 BC
Ever wonder how Blue Cross can guarantee and gift their pharmacy commissions (the politically correct term is “rebates”) as a credit applied to their administration fees? Sounds generous doesn’t it.
The Edinburg Independent School District thinks so. “We do not pay Bue Cross to administer our plan at all” says their benefits manager. The lure of getting something for nothing is foundational to the con artist’s trade. We call this Hoodwinking.
You’re wondering what the details are behind such a generous offer. What does the group give up in return for the gift received? Mother often said nothing is ever free, there has to be strings attached. Mother is never wrong.
So what is the truth? How can we find out? A Blue Cross ASO Agreement provides clues:
CLAIM ADMINISTRATOR’S SEPARATE FINANCIAL ARRANGEMENTS WITH PRESCRIPTION DRUG PROVIDER
Employer understands that Claim Administrator may receive such discounts during the term of the Agreement. Neither Employer nor Covered Persons hereunder are entitled to receive any portion of any such discounts except as such items may be indirectly or directly reflected in the service charges specified in the Agreement……………….Prime (PBM) retains the difference between its acquisition cost and the negotiated prices as its fee for the various administrative services provided as part of the mail-order pharmacy and/or specialty pharmacy program. Claim Administrator pays a fee to Prime for pharmacy benefit services, which may be included in the Administrative Charge charged by Claim Administrator to Employer. A portion of Prime’s PBM fees are tied to certain performance standards, including, but not limited to, Claims processing, customer service response, and mail-order processing.
CLAIM ADMINISTRATOR’S SEPARATE FINANCIAL ARRANGEMENTS WITH PHARMACY BENEFIT MANAGERS
The Pharmacy Benefit Manager(s) (“PBM”) negotiates rebate contracts with pharmaceutical manufacturers and has agreed to provide rebates made available pursuant to such contracts to Claim Administrator under the PBM’s agreement with Claim Administrator. Claim Administrator may also negotiate rebate contracts with pharmaceutical manufacturers. This negotiation is conducted by the PBM (or Claim Administrator, as applicable) for the benefit of Claim Administrator and not for the benefit of Employer or Covered Persons………………Claim Administrator hereby informs Employer and all Covered Persons that it owns a significant portion of the equity of Prime………………Employer acknowledges that it has negotiated for the specific Rebate Credit included as part of this Agreement and that it and its group health plan have no right to, or legal interest in, any portion of the rebates provided by the PBM or such manufacturers to Claim Administrator and consents to Claim Administrator’s retention of all such rebates. Rebate Credits shall not continue after termination of the prescription drug program……………………As of the Effective Date, the maximum that a PBM has disclosed to Claim Administrator that the PBM will receive from any pharmaceutical manufacturer for manufacturer administrative fees is five and one-half percent (5.5%) of the Wholesale Acquisition Cost (“WAC”)
Imagine the fun to be had interviewing a Blue Cross sales representative in front of their client. We did that once, and it was more than a little bit interesting. Try it some day, you’ll like it.
