MAC the Knife - Cutting Pharmacy Benefit Costs
Posted by Roy Wilkinson on Fri, Apr 17, 2009 @ 10:07 AM
Recently, I received a call from an Rx plan sponsor to see if I could help them with a situation that was brought to their attention by one of their plan members: the member went to have an Rx filled for simvastatin (generic Zocor), a popular generic cholesterol control medication, via the mail order option in their benefit plan. The cost of the prescription, after discount, for a 90-day supply was approx. $185. 
The same member subsequently had the same prescription filled at a retail pharmacy for a 30-day with a total cost of $16. "How can this be?" asked the puzzled benefit administrator. Here's how:
The mail order option offered generic pricing of Average Wholesale Price ("AWP") minus a discount. In this case, minus 55%. The retail store provided a cost formula based on Maximum Allowable Cost ("MAC"). This is a cost model established by the Pharmacy Benefit Manager ("PBM") and is the maximum price that will be paid to the pharmacy for a generic drug. In some cases, the PBM will set a MAC price much closer to the true acquisition cost than any of the other arbitarily established pricing benchmarks. In this case, the MAC cost was significantly under the AWP discount offered in the sponsor's contract. PBMs are typically reluctant to offer MAC pricing at mail and usually will not do it unless the plan sponsor identifies the pricing discrepancy, and requires/demands a revision.
Many PBMs depend on this pricing tactic in order to maintain one of their largest sources of revenue, the pricing spreads that can be created when filling generic drugs at mail. It's one of the reasons they encourage plan sponsors to utilize plan designs that provide members with reduced co-pays when filling maintenance medications through their mail order facility.
MAC continues to be a potential source of unnecessary cost or a great cost savings feature, if you are a plan sponsor that knows how to utilize its merits.
MAC definitions, pricing models and guarantees are all areas of concern for the plan sponsor and need to be analyzed and corrected in a majority of PBM contracts. Typically, the PBM reserves the right to alter the MAC list (including the number of generics that make up the list) and the MAC costs, all at their own discretion. MAC lists can range from 150 generic drugs to over 2,000. Many times the PBM will not disclose that they utilize multiple MAC lists and can substitute one list for another with the same client, again at their sole discretion.
Many times, a generic guaranteed discount is quoted in the contract with the plan sponsor. On the surface, it can look appealing. It may be AWP-60% as an example. However, without extending the guarantee to ALL generics, and not just those on a MAC list, the PBM can alternate and re-calculate MAC prices so that they will always meet the guarantee, even though the true discount across all generics may be closer to 40%!
Additionally, the contract can be "gamed" by the inclusion of language that appears to offer the sponsor the lowest cost option by saying something like "lowest cost of MAC, or retail pharmacy Usual and Customary charge, or AWP minus discount." By controlling the MAC list, a PBM can manipulate the volume of generics that will be filled at a much lower discount than the plan sponsor expects to receive.
All in all, the use or abuse of MAC is just one additional reason to have an Rx contract reviewed by an experienced and independent consultant.