Rebates and fees paid by drug companies to pharmacy benefit managers to promote the companies' drugs were the "keys to profit" for some PBMs, according to a General Accounting Office report expected to be released Jan. 10, the New York Times reports. Officials with Medco Health Solutions, a subsidiary of pharmaceutical company Merck, and AdvancePCS, two of the nation's largest PBMs, said the rebates and fees they receive from drug manufacturers are "importan[t]" to their companies' finances but added that they would not release the amounts because it is "propriety information." The GAO report examined prescription drug savings PBMs produced for the Federal Employees Health Benefits Program. Researchers examined costs, prices and rebates on prescription drugs through Blue Cross and Blue Shield plans, the Government Employees Hospital Association and PacifiCare, which has its own pharmacy management unit, the Times reports. The study included FEHBP members in California, Washington, D.C., and North Dakota. Advance PCS is a principal PBM for drug purchases through retail stores, while Medco handles mail-order prescriptions under FEHBP. PBMs were able to obtain reduced prices for FEHBP members, the report notes (Freudenheim, New York Times, 1/10). PBMs help reduce costs for health plans, public health programs and employers by directing doctors toward less expensive brand-name medications and generic treatments through prescription drug formularies. Brand-name pharmaceutical companies provide PBMs with discounts and rebates to have their treatments placed on the formularies, and PBMs share those discounts with their clients. However, in the past few years, competition between PBMs has reduced the rates that they can charge clients to process claims, and some have begun to help brand-name drug companies market more expensive treatments to increase revenue, the Wall Street Journal has reported. Earlier this week, a federal district judge unsealed court documents confirming for the first time that Medco helped increase market share for Merck drugs (Kaiser Daily Health Policy Report, 1/8).

Reaction
Advance PCS and Medco officials said they were "pleased" the report found that the companies were "producing savings" for FEHBP. The Times reports that Medco officials said that even though they have made arrangements with drug companies to promote certain drugs, such deals benefit customers because prices drop for a group of drugs, including the manufacturer's preferred treatment. Medco spokesperson Ann Smith said, "The crux of the report is that PBMs do save money on behalf of the health plans." But Sen. Byron Dorgan (D-N.D.), who requested the GAO report, said, "Do these rebates have the perverse incentive of actually pushing higher-cost medicine onto the patient?" Crystal Wright, a spokesperson for the National Association of Chain Drug Stores, added, "If no one can say how many of the rebate dollars the pharmacy benefit managers are keeping, how do you know whether they are effectively reducing overall costs?" She added that the report is a "disservice to policy makers who are about to embrace various Medicare prescription drug bills that are all centered around pharmacy benefit mangers" (New York Times, 1/10).