HD32 - A Report on Pharmacy Benefit Manager Practices and Therapeutic Interchange


Executive Summary:
Growing emphasis on controlling spending growth for employee health benefits has propelled the growth of managed care in Virginia over the past several years. This emphasis has led to increased health plan competition based largely on price. Increased price competition has fueled innovation in the management of health costs--especially for health spending components experiencing above average cost growth. As one of the fastest growing components of health spending, pharmacy benefits have become subject to several new techniques designed to control spending growth. Techniques include mail order, formulary development, prior authorization, generic substitution, and therapeutic interchange.

The following two studies provide information on the changing face of pharmacy benefit management and estimates on the incidence of therapeutic interchange in the Commonwealth of Virginia. The first study, conducted by the Mercatus Center at George Mason University, estimates the incidence of therapeutic interchange based on pharmacy benefit manager claims data. The second study, conducted by the School of Pharmacy at Virginia Commonwealth University, is a literature review and summary description of the pharmacy benefit management industry.