What is a generic drug? What is a brand drug? These questions would appear to have obvious answers, but that's not necessarily true in the Byzantine world of PBM contracting. Some industry insiders contend that many PBMs intentionally blur the definitions of "brand drugs" and "generic drugs" to suit their financial interests. Health plans and employer groups, meanwhile, are largely unaware that this purported scheme could be costing them millions of extra dollars per year on their drug spend, Rx consultants and auditors tell DBN.
"This issue is not on the radar screen of payers, consulting firms or anyone but the PBMs that are taking advantage of contract ambiguities to make a lot of money," says Linda Cahn, president of Pharmacy Benefit Consultants and an attorney who has reviewed hundreds of PBM contracts and litigated against PBMs.
PBMs frequently write contracts that lack any definition of "brand drug" and "generic drug," Cahn tells DBN. Or the contracts may contain such ambiguous definitions that PBMs can manipulate the terms to achieve financial gains that should flow to the Rx payer, she asserts. Cahn acknowledges that it's difficult to put an exact dollar figure on the practices, which may not be illegal. But other PBM auditors say it could be costing payers several percentage points on their total annual drug costs.
By miscategorizing drugs, Cahn asserts, PBMs achieve a number of financial aims. These include charging brand prices for generic products, retaining rebates for brand drugs by calling them generics, and misstating a health plan's generic drug utilization rate. When vague definitions are written into the contract, "PBMs can basically do whatever they want in connection with all matters related to brand and generic drugs," she says.
Large PBMs contacted for comment by DBN say they follow accepted industry standards in defining drugs as brand or generic, and work with clients on addressing any concerns about the classification.
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