Mark Riley on Paying the Middlemen in the Pharmaceutical Industry

by Arkansas Business Staff  on Monday, Dec. 16, 2013 12:00 am  

Mark Riley

Mark Riley is president of the National Community Pharmacists Association, which represents America’s community pharmacists, including the owners of more than 23,000 pharmacies.

Riley owns East End Pharmacy in Little Rock. He also is an expert on the pharmacy benefit manager industry in the United States, having served as a PBM executive, and has testified before Congress about the topic. Riley served on the board of directors and was president of the APA in 1984-1985. He was recognized as the APA Pharmacist of the Year in 1988. In October 2011, the Harding University College of Pharmacy honored Riley by renaming its NCPA student chapter the Dr. Mark S. Riley Chapter.

Riley earned both his bachelor’s degree and doctorate in pharmacy from the University of Arkansas for Medical Sciences College of Pharmacy.

What’s the biggest problem in controlling health care costs today?

As related to prescription drug costs, we’ve insulated consumers from the true cost of health care by having the cost that the patient pays be only marginally related to the real costs of the health care system. The cost to the patient doesn’t necessarily rise when the cost of the drugs or services rises. A patient may have a $30 co-pay whether the cost of a drug is $100 or it increases to $300. The patient doesn’t feel the increase.

In addition, the pharmacy benefit managers (PBMs), which are the middlemen in prescription drugs, charge payers (employers and insurance companies) significantly more, in most cases, than they reimburse the pharmacies, but this is typically not disclosed to the payer. For example, when an employer pays $50 for a prescription, the pharmacy may have received only $30, creating a “spread” that is often hidden from the employer. The difference is retained by the PBM. We have seen instances where the “spread” was more than 50 percent of the total prescription cost.

PBMs — pharmacy benefit managers — occupy a unique space as middleman between pharmacists and insurers. From the pharmacists’ point of view, what are the advantages and disadvantages of PBMs?

PBMs are the middlemen who determine how much pharmacists get paid for drugs. The largest PBMs are ESI-Medco, CVS-Caremark and Catamaran. There are no Arkansas-based PBMs. The advantages of PBMs are that they provide an organized way of electronically processing the coverage and payment of prescription drugs. This process is efficient for payers, pharmacists and patients. PBMs do a very good job of processing payments similar to Visa or MasterCard as the middlemen.

However, any savings claims PBMs make are very suspect in the distribution of prescription drugs. Since the late 1980s, when PBMs gained favor in the managed care industry, prescription drug costs have skyrocketed. The model commonly employed by PBMs creates misaligned incentives that create hidden cash flow streams for the PBMs that the payer knows nothing about. PBMs operate with very few rules.

For a while, there was a shortage of pharmacists in Arkansas, and the state’s educational system responded. Since then we’ve seen consolidation of the retail pharmacy business. How well is the supply of pharmacists in Arkansas in balance with the current demand? What do you expect the demand to be like in Arkansas and elsewhere in the next few years?

There is a good balance. While the market may be slightly tighter than two or three years ago, pharmacists are finding good jobs. We’re fortunate in Arkansas to have two excellent colleges of pharmacy at UAMS and Harding University. There were 164 graduates in May 2013. A May 2013 survey of 151 Arkansas college of pharmacy graduates revealed that 85 percent had accepted positions in retail or health-system settings before graduation.

 

 

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