Setting the Record Straight on Contracts

Mar 15, 2018
Express Scripts does well when our clients do well. We hold the line on drug spending and our patients and clients benefit.

New Pill Bottle

This morning, Axios posted an article purporting to examine how Express Scripts contracts with prospective employer clients. The article relies on unnamed sources, a disgruntled consultant, and an outdated contract template to make sweeping generalizations about our company that ignore reality.

We want to set the record straight, providing details which we shared with Axios, but which were not included.

The Reality about Audit Rights

Express Scripts’ performance is audited regularly. Our clients – the employers, health plans, labor unions and government agencies that hire PBMs – can audit our results at any time. If there are discrepancies, we work to resolve them immediately. We are open to working with auditors who are accurate, confidential and unbiased. Express Scripts has denied a very small number of specific auditors over the years for failing to meet those requirements.

An Outdated Contract

The contract template cited by the reporter in the story is several years old and not used by Express Scripts. Template contracts are a basic starting point for negotiations with clients and are customized to each transaction. Typically, clients have engaged outside lawyers and consultants who are knowledgeable in the industry and demand sophisticated edits to the template contract discussed in the story.

Alignment with Clients, not Pharma

Express Scripts does well when our clients do well. We hold the line on drug spending and our patients and clients benefit.

Last month, Express Scripts reported that the rate of growth in prescription drug spending for our clients in the commercial market was 1.5% in 2017, the lowest we have measured since we first began reporting these data in the early 1990s; fully 44% our clients saw negative trend – their overall rate of growth in drug spending declined.

We saved clients $32 billion last year. Every one of those clients can audit our results at any time.

PBM Profitability Low

A 2017 study conducted by the University of Southern California found that PBMs retain just $2 of every $100 spent on prescription drugs, less than retail pharmacies and one-seventh that retained by brand pharma manufacturers.

A word about MAC Pricing and Brand/Generic Algorithms

As stated to Axios, our contracts are written to address the many nuances of the pharmacy supply chain that can happen over the course of a multi-year contract, including changes in drug prices, availability of medications, and new therapies that come to market. MAC pricing and our brand/generic algorithms are designed to ensure clients obtain best pricing when the supply chain changes or there is more demand for a medication. For example, a public health crisis, like this year’s flu epidemic, which has caused a shortage of generic oseltamivir phosphate and increased demand for branded Tamiflu®.

Nearly all plan sponsors use maximum allowable cost or “MAC” reimbursement to ensure that they do not over-pay for drugs that are clinically the same. MAC works by setting one price for a set of clinically identical products. Capping the amount that plan sponsors will reimburse the pharmacy for a multi-source medication, MAC pricing incentivizes the pharmacies to buy medications from competitively priced manufacturers and wholesalers. It’s why states adopted MAC lists after government audits showed that Medicaid reimbursements for generic drugs far exceeded a pharmacy’s acquisition costs, and now 45 state Medicaid programs are using MAC lists to better control costs.

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Lab Staff
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