Business Is Booming For Big Drug Negotiators You may have never heard of a "pharmacy benefit management company" — but if you are insured, odds are that you are a customer of one. With more than 200 million clients, PBMs have the power to set drug prices and control markets.
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Business Is Booming For Big Drug Negotiators

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Business Is Booming For Big Drug Negotiators

Business Is Booming For Big Drug Negotiators

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If your health insurance covers prescriptions, you are probably a customer of a pharmacy benefit management company. You may not quite realize it. You may not even know what a pharmacy benefit management company is. But we're going to explain, because that's one type of business that is actually growing in this recession.

And as Matt Sepic of St. Louis Public Radio reports, so-called PBMs are poised for even more growth as baby boomers age and Congress prepares to overhaul health care.

MATT SEPIC: St. Louis-based Express Scripts is now the nation's largest pharmacy benefit management company. It's an island of prosperity located near a long-shuttered car plant and an empty terminal used in the movie "Up In The Air."

Express Scripts employs about 4,000 people here and plans to hire more when it opens a new mail-order prescription center.

Chief medical officer Steve Miller says the company is in an economic sweet spot. With prescription demand rising along with costs, someone needs to manage all those pills and negotiate lower prices with producers.

Dr. STEVE MILLER (Chief Medical Officer, Express Scripts): Pharmacy is the number one touch point in health care. People use their hospitals, on average, less than once a year. They use pharmacy, on average, 11 times a year.

SEPIC: The PBM industry emerged when health plans started covering prescriptions. Big insurance companies found negotiating with big pharma to be a hassle, so PBMs filled the void. Today, they cover more than 200 million Americans. Critics say that has marginalized small, independent pharmacies, because now even drugstore chains like CVS manage prescription benefits. But Express Scripts scientist Bob Nease says PBMs have the clout to check the power of drug companies.

Dr. BOB NEASE (Scientist, Express Scripts): The other way that we get buying power is by the ability to move market share, large numbers of members from a more expensive drug to a less expensive drug.

SEPIC: Nease says company researchers study ways to tweak incentives to urge people toward mail-order prescriptions, for example, which are cheaper to deliver. PBMs also push generics aggressively.

That's usually good for most customers, but it wasnt for Pat Cleeland. She takes medication to prevent seizures. When the drug went generic, her PBM said it would only pay for the cheaper pills, but Cleeland says her doctor would not allow it.

Ms. PAT CLEELAND: We didn't know how we were going to pay for getting a name brand in this medication. We had a partial refill from a local pharmacy. It was three days worth, and it was $85.

SEPIC: Cleeland says after her doctor got involved, she was able to avoid what could have been a bureaucratic nightmare.

Surveys show other customers are generally happy with PBMs. And Consumers Union health care analyst Steven Findlay says they're usually on the patient's side.

Mr. STEVEN FINDLAY (Health Care Analyst, Consumers Union): They absolutely do deliver a service to workers and consumers. There's no question.

SEPIC: But Findlay says the downside of pharmacy benefit managers is the negative effect theyve had on small independent pharmacies.

At Lindenwood Drug in St. Louis - a street-corner shop a world away from the Express Scripts office park - pharmacist Tom Hunt is still making a living, even as similar shops have closed. But he says PBMs make it tough.

Mr. TOM HUNT (Pharmacist): How many businesses do you know of that 80 to 90 percent of their sales are priced by a third party? Everything I fill out a prescription card for a patient with insurance, they're setting a price on it.

SEPIC: Hunt says these days, he's found a niche in customer service and even fills prescriptions for pets. But with drug costs continuing to climb and Congress on the verge of expanding access to health insurance, the pharmacy benefit management industry shows no immediate signs of slowing down.

For NPR News, I'm Matt Sepic in St. Louis.

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