NCPA - National Center for Policy Analysis

Pharmacists Out to Regulate Drug-Benefits Managers

September 5, 2001

Health plans and self-insured employers often hire firms known as pharmacy-benefits managers to design drug benefits packages that help contain costs. The firms steer patients toward certain drugs -- or switch them to another drug in a therapeutic class -- and negotiate rebates with drug manufacturers in return.

But pharmacists, through their trade association the National Community Pharmacists Association -- which represents 25,000 independent pharmacies -- are planning a push to require states to step up regulation of the firms.

About half of state insurance agencies already regulate the firms -- either as claims processors or "utilization-review agents," which determine if prescribed services are medically necessary.

  • Idaho, Mississippi, North Carolina, New Mexico and Wisconsin regulate claims-processing activities of drug benefits managers.
  • Pennsylvania, South Dakota and Texas monitor utilization review -- which is checking to see if delivered care is appropriate.
  • Another 14 states perform both regulatory functions.
  • Illinois conducts a third-party prescription-administration function.

Pharmacy benefits managers serve 170 million people nationally and see the proposed regulations as an unnecessary layer of rules.

While pharmacists contend new regulations are needed to protect consumers, PBMs argue they are intended to protect pharmacists' businesses. Indeed, PBMs have been taking profits away from independent pharmacists for years.

Source: Russell Gold, "Drug Benefits Managers Under Fire," Wall Street Journal, September 5, 2001.

For WSJ text (requires interactive subscription)


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