Pricing Strategies For Prescription Drugs Essay

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Pricing Strategies
Pharmaceutical Benefit Managers, PBM use several different pricing strategies and tools to charge employers for prescription drugs. These strategies help PBM’s turn a profit while still being able to create a fair and affordable situation to the employer. The goal for PBM’s is to remain competitive while generating a business contract between the organizations and pharmaceutical companies. The organization must be able to take an active role in their contracts to continue to provide quality and affordable prescription drug programs. “A comprehensive generics program can significantly lower prescription drug costs, control utilization and play a major role in helping to improve overall patient outcomes” (Jones, 2003).
PBM’s use the following strategies in their contracts to generate revenue when charging for prescription drugs: Administrative Fees are charged in order to process claims including reporting, utilization, and management. They typically have an average of $.20 to $.70 per claim or markup the Maximum Allowable Cost, MAC. MAC provides a generic drug list to the employer that determines payments. The Average Wholesale Price, AWP, is the price charged nationally and is normally reflective in the MAC price list to the employer. There are also Dispensing Fees that are determined by the PBM’s contract that charge for refilling prescriptions. PBM’s can also use a Wholesale Acquisition Cost, WAC, that allows them to determine drug cost based off

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