Pharmacy Benefit Managers:

FEHBP Plans Satisfied with Savings and Services, but Retail Pharmacies Have Concerns

HEHS-97-47: Published: Feb 21, 1997. Publicly Released: Feb 21, 1997.

Additional Materials:


Bernice Steinhardt
(202) 512-6543


Office of Public Affairs
(202) 512-4800

Pursuant to a congressional request, GAO reviewed the Federal Employees Health Benefits Program's (FEHBP) pharmacy benefits, focusing on: (1) why FEHBP plans have contracted with pharmacy benefit managers (PBM) to provide pharmacy benefits; (2) what types of services and savings the PBMs provide FEHBP plans; (3) how FEHBP plans evaluate PBM customer service; and (4) retail pharmacists' concerns about the quality of PBM pharmacy services and the effect of some PBM practices on the retail pharmacy business.

GAO found that: (1) the three FEHBP plans it studied contracted with PBMs to control rapidly rising pharmacy benefit payments; (2) the plans estimate that PBMs saved them over $600 million in 1995 by obtaining manufacturer and pharmacy discounts and managing drug utilization; (3) these savings reduced the pharmacy benefit costs each plan believes it would have paid without using a PBM by between 20 and 27 percent; (4) the PBMs met most of the performance standards in their 1995 contracts, and the plans believe that the PBMs have provided plan enrollees high-quality pharmacy service; (5) surveys of plan enrollees also indicate a high degree of satisfaction, with between 93 and 98 percent of respondents noting satisfaction with their pharmacy benefit services; (6) the plans' decisions to use PBMs to control pharmacy benefit costs, however, can shift business away from retail pharmacies; (7) for example, Blue Cross's 1996 benefit change, which encouraged mail order purchases, reduced affected enrollees' payments to retail pharmacies by 36 percent or about $95 million; (8) during the same period, total payments to retail pharmacies for all enrollees decreased by about 7 percent or about $34 million; and (9) moreover, PBM and plan officials, as well as industry experts, acknowledge that any additional efforts to control FEHBP pharmacy benefit costs in the future might require plans to adopt more restrictive cost-containment procedures that could possibly limit enrollees' access to drugs and pharmacy services and lessen enrollees' satisfaction with their pharmacy benefits.

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