Wal-Mart takes on PBMs: this is getting GOOD!

We speculated last week that the big health insurance companies and their PBMs (pharmacy benefit managers) may soon attempt to force employees toward mail-order drugs. It’s certainly a real possibility after the PBM Express Scripts began providing mail-order delivery as a default option for employer-based health plans.

As I predicted then:

1. Soon, all other PBMs will offer the same program.
2. Then, one PBM will come up with a program that makes participation in the mail-order program mandatory in order for employees to receive coverage — in the name of employer cost savings.
3. That will become the dominant model for employer-based prescription drug insurance.

I then added, forebodingly:

Now, I haven’t factored in the uproar that this would cause with the Wal-Marts, Rite Aids and the like…

Well, you can forget Rite Aid, because they’re going to go out of business anyway. But Wal-Mart, that’s another story. You could bet they weren’t going to take this sitting down.

So how to fight the PBMs? How about by bypassing the health insurance companies altogether and taking your pitch straight to employers?

As Kaiser posted today:

Wal-Mart on Friday announced that it is in negotiations to expand to several other companies a generic drug purchasing pilot program it currently runs with Caterpillar…

Under the pilot program, Wal-Mart waives the $5 copayment for generic drugs for Caterpillar employees when they purchase their medication at Wal-Mart or Sam’s Club pharmacies. According to the [Chicago] Tribune, the incentive to fill prescriptions at Wal-Mart or Sam’s Club pharmacies boosts Wal-Mart’s pharmacy business and pushes more potential customers into their retail stores, where they might purchase other items.

According to the Tribune, the “most radical aspect of the test … is the threat of unraveling how the health care industry buys and sells prescription drugs.” As part of the program, Caterpillar has a contract to purchase drugs for employees directly from Wal-Mart, bypassing the need for a pharmacy benefits manager…

Walgreens, meanwhile, has announced that it is pursuing a strategy similar to Wal-Mart’s.

This is beautiful, folks. It almost certainly means that the costs of generic drugs will continue to fall in the United States, which is great news. And perhaps the competition between retail pharmacies and PBMs will squeeze some of the inefficiencies out of the current system, reducing administrative costs as well.

Unfortunately, this battle can do little to reduce the prices of brand-name prescriptions, which are the real reason Americans can’t afford to pay their drug bills anymore. Just as drugmakers can dictate their monopoly pricing to the consumer, they can also dictate it to the middlemen.

Still, Wal-Mart vs the PBMs will be fun to watch.

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