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A prescription error

WHEN CONGRESS last year passed its Medicare prescription bill with a ban on bulk purchasing of drugs by Medicare, it opened the door to profit-making companies that do group drug purchasing for health care plans and employers. They are called pharmacy benefit managers, and a recent settlement with federal prosecutors and 20 states over questionable practices by the largest firm, Medco, demonstrates that law enforcement officials need to monitor them closely.

Pharmacy benefit managers, or PBMs, bargain with drug companies for rebated drug prices by guaranteeing large numbers of customers from a managed care plan or big employer. A PBM often gets a cut of the rebates, but most savings typically go to the business or insurer, with benefits passed on to patients.

Of course, patients would benefit from even bigger discounts if the government were doing the bargaining for all Medicare recipients, as is the case with the Department of Veterans Affairs. But the pharmaceutical industry recoils from the idea of squaring off against the market clout of a single buyer for Medicare. Congress obliged by forbidding the practice in the law passed last year.

In the case against Medco, the federal government and 20 states, including Massachusetts, said Medco actually switched patients to higher-priced drugs or ones that required more visits to doctors. Also, prosecutors said Medco didn't tell patients or their doctors that Medco would profit from the switches by getting greater rebates from the drug companies. In some cases, Medco switched patients' drugs without getting approval from doctors.

Separately, Massachusetts said Medco cheated the state of rebates gained while it managed drug benefits for state employees and retirees. Medco resolved the Massachusetts case by paying $5.5 million.

While denying any wrongdoing in Massachusetts and the other cases, Medco did agree to change its ways. It promised not to switch patients to higher-priced drugs and to repay patients if a switch causes higher out-of-pocket costs. Medco also said it would explain the rationale for any drug switching to both doctors and patients and disclose any financial incentive to the plan or employer for such switches. The company will tell patients they can reject drug switches, which may lead to a higher cost for the patient.

These agreeemnts should at least make PBM actions more transparent to patients and less open to abuse. But even openly run PBMs can do only so much to protect Medicare members or other consumers from high drug costs. Bills proposed by Senator Edward Kennedy and others would let the government fulfill its logical role as a big, nonprofit pharmacy benefits manager for Medicare recipients. 

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