What an easy question! First they arbitrarily inflate the price…………
Then they give you a discount that makes you feel like a winner when in reality you’re a loser but don’t know it. Then they pay the pharmacy based on an even greater discount than they gave you. Then they pocket the difference.
In all of this monkey business the PBM does not handle inventory, transportation or anything else other than providing an electronic means to transfer eligibility and fund transactions with other people’s money. Making money has never been easier.
Here’s an example (SOURCE: (PBM) 101)
- Nadolol Tab 20MG AWP = $339.10
- Group negotiated 75% discount off of AWP = $84.75 discounted cost for Nadolol (this is what the plan pays)
- Pharmacy’s cost = $23
- Pharmacy Dispensing fee = $5
- PBM Admin fee = $5
- Net spread for PBM = $84.75 – $33 ($23+$5+$5) = $51.75. This is their spread.
In this example the PBM kept 61% of what the plan paid.
But that’s not all……………………
Somewhere in the mix are commissions which are imbedded in the manufacturer’s pricing model. Those commissions are welded into pricing and only those with the right cutting torch can free them up. You can’t get your hands on them without asking. If you don’t ask you don’t get. But someone does. Who? It could be any number of people all with their hands out for their fair share of the loot.
As little as 30% and as much as 50% or more of a plan’s drug spend is wasted money stolen by third party intermediaries. There’s more money to be made on the pharmacy side then there is on the medical side if you know how.