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PBMs report increase in drug margins

MANAGED CARE January 2006. © MediMedia USA
The Formulary Files

PBMs report increase in drug margins

MANAGED CARE January 2006. ©MediMedia USA













Discounts in average wholesale price for brand-name drugs in retail pharmacy increased from 14.5 percent in 2003 to 14.8 percent in 2004. Overall, the AWP discount increased by 3 percentage points from 1995 to 2004, according to the Prescription Drug Benefit Cost and Plan Design Survey Report, 2005 edition, from the Pharmacy Benefit Management Institute. The report is based on data collected from 404 employers with approximately 8.6 million beneficiaries.

The average retail dispensing fee for branded drugs decreased from $2.05 in 2003 to $1.95 in 2004.

The average reimbursement rate, a combination of AWP and average dispensing fee, declined from 87.7 percent in 2003 to 87 percent in 2004.

Mail-service discounts also increased. The average discount from AWP for branded drugs delivered by mail-increased by 0.6 points from 20.4 percent in 2003 to 21 percent in 2004. Average mail dispensing fees decreased from $0.52 in 2003 to $0.41 in 2004. The average reimbursement rate, which is a combination of AWP and average dispensing fee, declined from 79.7 percent in 2003 to 79.1 percent in 2004.

In 2000, 58 percent of employers paid retail pharmacies 87 percent or higher of the AWP for brand drugs. In 2004, only 10 percent of employers reported paying that amount. Also in 2000, 6 percent of the survey respondents reported paying less than 85 percent of the AWP. By 2004, 30 percent of employers reported paying less than 85 percent of the AWP.

More discounts, lower fees for retail pharmacies

Trends in mail service reimbursement

Source: Prescription Drug Benefit Cost and Plan Design Survey Report, Pharmacy Benefit Management Institute