Pharmaceutical Consulting: How It All Began
Just like many other emerging fields of business
, pharmaceutical consulting has its fare share of doubters. Corporations aren't anxious to break tradition due to potential risk. Here is a brief look at the history of pharmaceutical consulting that will hopefully open eyes and create awareness of its role in the health care industry.Health Maintenance Organizations, or HMOs, created somewhat of a path for pharmaceutical consulting firms in the 199's. In order to take more control of the overall prescriptions cost, HMOs began to develop "formularies", or lists of medications that the HMO covered. By using formularies, HMOs highly encouraged physicians to prescribe specific medications over others, while charging consumers more for medications there didn't appear in the formulary.
This method of controlling costs proved effective, but it was also complicated and labor-intensive. As HMOs grew in size and scope, many began to outsource their pharmacy benefit managementor "PBM"to external pharmaceutical consulting firms.
Soon, this outsourcing to pharmaceutical consulting companies evolved into a two-step process. First, the pharmaceutical consulting firms obtained volume discounts from drug companies for the medications that were covered under the HMO's formulary.
Next, the companies would steer pharmacists and doctors to prescribe medications that were found on the HMO's formulary. According to smartmoney.com, by January 2006 the three largest pharmaceutical consulting firms were processing prescription benefits for more than 150 million patients and generating combined revenues of $89 billion.
Very recently, consulting firms have also expanded their reach into the arena of Medicare benefits. This is in part because of how Medicare's drug benefits are currently structured: Although the government controls Medicare's hospital, physician and home health care programs, Medicare recipients receive their drug benefits through private plans.
This discrepancy in oversight has allowed pharmaceutical consulting firms to set formularies for Medicare recipients, just as they have for HMOs.
There has been some controversy over the power some pharmaceutical consulting firms wield in determining which medications are included in a formulary. A few firms have taken criticism for accepting cash from drug companies while using pressure to force doctors to prescribe specific drugs. (Not all pharmaceutical consulting companies use these strong-arm tactics, however.)
It's quite likely that the U.S. health care system will undergo a significant evolution over the next few years, as Congress considers the extent to which the government should be involved in the health care industry. But regardless of how the U.S. health care system changes, it's also likely that pharmaceutical consulting firms will continue to play a role in helping payers manage the cost of prescription medications.
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