Critics Attack Secret Deals by Middlemen to Buy Drugs:
"Federal prosecutors who have been investigating the industry are offering briefings to employers on ways to demand more transparency in their drug plans. Big employers, including the Ford Motor Company and Verizon Communications, have been pressing in negotiations for the benefit managers to be more open or to eliminate their deals with manufacturers altogether.

Some drug manufacturers, meanwhile, are saying they have no objection to letting employers see their contracts with the pharmacy benefit managers, contradicting assertions by those companies that it is the manufacturers who have insisted on secrecy."

And though a disclosure requirement was dropped from the Medicare bill before it was passed by Congress, regulators are likely to demand information about rebate arrangements, said Thomas Scully, who resigned this month as head of the federal Center for Medicare and Medicaid Systems.

"They will have to be more transparent if they are dealing with taxpayer dollars," he said, adding that the government would probably offer benefit managers the assurance that information they disclose would not be released to competitors.

The pharmacy benefit managers have been growing robustly, and their stocks are up more than 80 percent this year. But they face rising competition from pharmacy managers owned by large insurance companies.

On Tuesday, Blue Cross and Blue Shield plans in Illinois, Texas and New Mexico said they were dropping their pharmacy manager, AdvancePCS, and transferring four million members to Prime Therapeutics, a fast-growing Blue Cross-owned pharmacy benefit manager based in Minnesota.

As owners, the health plans will of course be fully informed about Prime Therapeutics' contracts with drug manufacturers. "The market wants transparency," said Tim Dickman, the president and chief executive of Prime.

Several large commercial insurers, including Aetna, Wellpoint, Anthem, Cigna and Pacificare also have their own drug units.

Pharmacy benefit managers are paid by employers and health plans to negotiate reduced prices for drugs on preferred lists. The benefit managers also typically receive rebates from manufacturers, based on sales volume. They agree to pass a portion of these rebates, as well as other fees paid by the drug manufacturers, along to their customers.

Two big benefit managers, Express Scripts and Caremark Rx, have made formal promises to inform their customers fully about the manufacturers' payments. And many big employers use independent auditors to make sure they are receiving their due.

Even some of the largest employers say the four biggest pharmacy benefit managers - Express Scripts, Caremark RX, AdvancePCS and Medco Health Solutions - have refused to let them see the full text of the managers' contracts with manufacturers. Medco said last night that some of its clients, but not all, had the ability to see the full text in audits.

The inability to see the contracts has created "a cloud of suspicion, because of the inability of the benefit payers to see what those relationships are and how they may be affecting us as a benefit payer," said Dr. John Wright, pharmacy benefit manager at Ford Motor.…

http://www.nytimes.com/2003/12/20/business/20pbms.html?pagewanted=all&position=