“If it ain’t broke, don’t fix it” is a saying with which most of us are quite familiar. That axiom could be applied in the context of one critical aspect of health care delivery—specifically, the cost of prescription drugs and the pool of Pharmacy Benefit Managers (PBMs). Allow me to explain.
Pharmacy Benefit Managers make prescription drug benefits available for almost two-thirds of the nation’s population, including 13 million Texans. They accomplish this by providing coverage through a variety of entities including small businesses, health insurers, labor unions, state and local governments, Fortune 500 employers, and Medicare. By pooling the purchasing power of these consumers, PBMs make prescription drug benefits safer and more affordable.
They also support programs that promote the use of cost-effective prescription drugs, including generics, as well as the development of efficient distribution procedures such as mail-service pharmacies. Moreover, PBMs encourage price competition and negotiate discounts with manufacturers of therapeutically similar drugs. Additionally, they seek agreements with drug stores that participate in their pharmacy networks to provide discounts to customers.
Technologically advanced mail-service pharmacies, which are operated primarily by Pharmacy Benefit Managers, are extremely efficient and effective in dispensing prescriptions. These highly efficient pharmacies generate billions of dollars in savings each year.
In essence, by reducing drug therapy expenses, PBMs generate savings for individuals, insurance carriers, and companies that provide benefits, as well as others. Last year, Texans saved about $3 billion through prescription drug programs managed by PBMs. Estimates for savings in 2006 amount to some $4.8 billion. From 2005-2014, PBMs are expected to save Texans approximately $71.8 billion relative to unmanaged programs.
These savings, of course, free up money for consumers and businesses to purchase non-prescription drug goods and services. In 2005, the savings in Texas generated more than $6.8 billion in economic activity and almost 50,000 permanent jobs. Based on the volume of purchases last year and the current contract provisions, PBMs save the State of Texas an estimated $180 million per year on health benefit costs to its employees.
In a recent study, my firm estimated the overall impact of PBMs on the State budget last year to be $502.5 million. Included in this estimate are direct savings on prescription drugs, associated increases in economic activity, and positive fiscal effects associated with PBM operations. PBM-related economic activities and savings are projected to generate expansion in the average annual employment in Texas of about 111,870 persons over the next decade.
By helping keep the cost of health care delivery lower, PBMs aid in reducing the number of uninsured individuals in the Lone Star State. In 2005, PBMs and their effect of health costs led to a decrease in the number of uninsured Texans of almost 95,600.
Along with these benefits, PBMs help alleviate the growing shortage of pharmacists. Texas ranks 39th among all states in pharmacists per 100,000 population. With the opening of more than 1,000 new pharmacies in Texas from 1993 to 2004, the demand for pharmacists is naturally growing.
The PBM’s 727 highly efficient and automated mail-service pharmacies in Texas are helping to lessen the need for additional pharmacists. The PBM mail-order pharmacies also offer alternatives to individuals in areas underserved by retail pharmacies.
Despite all of these benefits, some folks are proposing to change a system that has proven to be significantly beneficial to the economy of the Lone Star State and the health and well-being of all of us who live here. Placing restrictions on PBM operations in Texas would diminish savings and benefits and add billions to the cost of prescription drugs for consumers, employers, and state and local governments over the next 10 years, as well as add to the ranks of the uninsured (Texas already has the highest portion of uninsured citizens of any state). Imposing unnecessary limitations would be harmful to the overall economy of our state.
Pharmacy Benefit Managers fill a vital and crucial role in the delivery of health care in Texas. The system ain’t broke; we don’t need to fix it.