Data Selling in the PBM Industry

I feel sorry for Mark Zuckerberg on the day that he has to testify to Congress.  He reminds me of the kids my kids hung around with in college.  Smart, nerdy and with a passion that only the young possess.  His net worth fell $3.3 billion (Daily Mail, January 13, 2018) from $78 billion to $75 billion over the recent scandal that he was selling Facebook personal data to advertisers.

Facebook is not the only company that turns a profit on data selling.  Yes, you got it.  The Pharmacy Benefit Management (PBMs) industry sells your data to drug pharmaceutical manufacturers.  And like the users of Facebook, you forgot to turn off your privacy settings.  Or, you forgot to get in the game and get some money back for yourselves.

Here is how it works.  At the end of a quarter, PBMs collect the data generated by the claims that plan sponsors pay for either in undisclosed spread pricing or in administrative fees in pass through contracts.  They collect the data to invoice manufacturers for the rebate payments owed to plan sponsors.  In order to substantiate market share rebates, manufacturers need all of the data in a therapeutic class.  So, on January 1, let’s say all four brand drugs in a therapeutic class have 25% each market share.  Then because the PBM (and the plan sponsor through copays), prefers Drug A over Drug B,C and D, the market share of Drug A goes to 35%, then the market share of Drugs B, C and D decreases to 22% each.  PBMs have to “prove it” to manufacturers by submitting claims data of all four drugs.  Data that includes the pharmacy dispensed, physician prescribed and zip code of the patient.  It doesn’t take a data scientist to figure out who the patient is, either.  Then, the PBM invoices the manufacturers from 3% to 5% of AWP for each claim of all four drugs.  Why?  Because it is valuable to drug manufacturers to not only find out the patients that are using their drugs but the patients that are not using their drugs, physicians not prescribing their drugs and pharmacies not dispensing their drugs.  This helps drug sales people target the physicians, patients and pharmacies they need to convince to prescribe, take and dispense, respectively, the “correct” drug.

You see where I am going? Didn’t know you were giving up a boatload a cash AND releasing data to drug reps?  Please read the fine print of your PBM contracts.  Some of the contracts say this:

PBM provides administrative services to contracted manufacturers, which include, for example, maintenance and operation of systems and other infrastructure necessary for invoicing and processing rebates, pharmacy discount programs, access to drug utilization data, as allowed by law, for purposes of verifying and evaluating applicable payments, and for other purposes related to the manufacturer’s products. PBM receives administrative fees from the participating manufacturers for these services. These administrative fees are calculated based on the price of the drug or supplies along with the volume of utilization and do not exceed the greater of (i) 4.58% of the average wholesale price, or (ii) 5.5% of the wholesale acquisition cost of the products. In its capacity as a PBM company, PBM also may receive other compensation from manufacturers for the performance of various programs or services, including, for example, formulary compliance initiatives, clinical services, therapy management services, education services, inflation protection programs, medical benefit management services, cost containment programs, discount programs, and the sale of non-patient identifiable claim information. This compensation is not part of the formulary rebates or associated administrative fees, and PBM may realize positive margin between amounts paid to clients and amounts received from pharmaceutical manufacturers. PBM retains the financial benefit of the use of any funds held until payment is made to the client

So now that you know, what are you going to do?  Turn off your privacy settings on your PBM contract? Is there an app for that?

But now, drug manufacturers have challenged us – YOUR PHARMACY BENEFITS CONSULTANT – to get this money for you, so this is why I am writing this blog.  Want the money for your plan?  PhRMa, the lobbying group for drug manufacturers, released a report in November 2017 stating that all we had to do was ask for it (Follow the Money, website of the PhRMA, November 2017): “Employer benefit consultants help employer-sponsored health plans negotiate with PBMs for better deals, though asymmetry in information about the level of available discounts often makes it challenging for these plans to compare bids for PBM services effectively.  PBMs also may classify fees as separate from rebates, allowing them to retain these payments rather than passing them along to health plans and employers.”

OK, I’m a good pharmacy benefits consultant, but I am not that good.  Try asking for these fees from the big PBMs (and some of the smaller ones) and the answer will be a resounding “NO!” until you – our clients and plan sponsors – start your own campaign like users of Facebook that recently said “No more!” and deleted their accounts.  Plan sponsors cannot delete their PBM accounts and no, there is no app to have PBM stop selling your data.  The only way to do that is to tell them to stop and take your business to a PBM that won’t sell you data.

Don’t be like the Facebook users who “didn’t know” that the data released into the internet about the time they were at their best friend’s bachelor’s party and decided to dance naked in cherry jello was a great idea and that the information got to their wife and she ended up getting really mad.  You now know that the PBMs use and sell your data.  What are you going to do about it?