Pharmacy Benefit Managers

The three Federal Employees Health Benefits Program (FEHBP) plans that GAO studied contracted with pharmacy benefit managers to control soaring pharmacy benefit payments. The plans estimate that the pharmacy benefit managers saved them more than $600 million in 1995 by obtaining manufacturer and pharmacy discounts and by managing drug utilization. The pharmacy benefit managers met most of the performance standards specified in their 1995 contracts, and the plans believe that these managers have provided plan enrollees with high-quality pharmacy service. Surveys of plan enrollees also indicate a high degree of satisfaction. However, the plans' decision to use pharmacy benefit managers to control costs can shift business away from retail pharmacies. Moreover, pharmacy benefit managers and plan officials, as well as industry experts, acknowledge that any additional efforts to control FEHBP pharmacy benefit costs in the future might require plans to adopt more restrictive cost-containment procedures that could possibly limit enrollees' access to drugs and pharmacy services and reduce enrollees' satisfaction with their pharmacy benefits.

GAO found that: (1) the three FEHBP plans it studied contracted with PBMs to control rapidly rising pharmacy benefit payments; (2) the plans estimate that PBMs saved them over $600 million in 1995 by obtaining manufacturer and pharmacy discounts and managing drug utilization; (3) these savings reduced the pharmacy benefit costs each plan believes it would have paid without using a PBM by between 20 and 27 percent; (4) the PBMs met most of the performance standards in their 1995 contracts, and the plans believe that the PBMs have provided plan enrollees high-quality pharmacy service; (5) surveys of plan enrollees also indicate a high degree of satisfaction, with between 93 and 98 percent of respondents noting satisfaction with their pharmacy benefit services; (6) the plans' decisions to use PBMs to control pharmacy benefit costs, however, can shift business away from retail pharmacies; (7) for example, Blue Cross's 1996 benefit change, which encouraged mail order purchases, reduced affected enrollees' payments to retail pharmacies by 36 percent or about $95 million; (8) during the same period, total payments to retail pharmacies for all enrollees decreased by about 7 percent or about $34 million; and (9) moreover, PBM and plan officials, as well as industry experts, acknowledge that any additional efforts to control FEHBP pharmacy benefit costs in the future might require plans to adopt more restrictive cost-containment procedures that could possibly limit enrollees' access to drugs and pharmacy services and lessen enrollees' satisfaction with their pharmacy benefits.