Express Scripts Must Disclose Markup in Drug Plans, U.S. Says

Pharmacy managers such as Express Scripts Inc. that administer Medicare drug benefits would have to reveal the markup they charge insurers for prescription medicines under a proposed U.S. rule.

The “spread” reflecting the difference between what companies such as St. Louis-based Express Scripts and Medco Health Solutions Inc. pay pharmacies and what they charge health plans hasn’t been reported. Doing so would “promote transparency of financial transactions” in Medicare, the U.S. health plan for the elderly and disabled, program administrators said today in a regulatory filing.

The rule would also require the companies to report the percentage of Medicare prescriptions they fill through their own mail-order pharmacies, compared with retail pharmacies run by Walgreen Co. and others. The pharmacy-benefit managers also would have to disclose the amount and types of rebates and discounts from drugmakers and the percentage of generic drugs dispensed.

The U.S. won’t publicly disclose the information, according to the filing. Medicare spends about $62 billion a year on its prescription drug benefit.

Pharmacy-benefit managers such as Express Scripts and Franklin Lakes, New Jersey-based Medco act as middlemen for drugmakers, pharmacies and health-plan sponsors, negotiating prices and managing the use of drugs by patients. Their profits are tied to cutting their clients’ drug costs.

Express Scripts has bid $29.1 billion for Medco in an effort to form the country’s biggest pharmacy benefits manager. The deal requires approval from the Federal Trade Commission.

The Washington association that represents the companies, the Pharmaceutical Care Management Association, has defended keeping spreads secret as an incentive for its members to negotiate lower prices. A spokesman for the association, Charles Cote, didn’t immediately comment.