Medicare Compliance & Reimbursement

The Medicare prescription-drug legislation being debated in Washington proposes private drug-only insurance plans - presumably operated by pharmacy benefit management companies - that would take on some insurance risk to participate in the program. Two financial analysts at a June 18 forum sponsored by the Center for Studying Health System Change had a word for that scenario: impossible. "I do not see any PBMs absorbing risk," said Alliance Capital Management Senior Vice President Norm Fidel. In normal business practice, PBMs manage drug benefits as an insurance company carve-out and take only administrative risk, said Fidel. In the past, House Ways and Means Committee Chair Bill Thomas (R-CA) secured assurances from PBM Merck-Medco that it would participate as a drug-only Medicare plan. But now the Medco PBM has split from its deep-pockets partner, the pharmaceutical giant Merck, and is no more likely than other PBMs to play, Fidel said. To get access to the capital reserves required to take on insurance risk, PBMs would have to partner with regular insurers in order to join Medicare as drug-only plans, said Fidel and Merrill Lynch First Vice President Roberta Walter Goodman. But "I personally do not think health plans are going to be lining up to take that risk," Goodman said.