Medco's Clash With Clarity

"They're not interested in something like this," Kelly says. "But I knew that from the get-go."

For now, at least, the major PBMs remain outstanding stock-market performers. Shares of both Medco and Caremark have jumped more than 30% over the past year, while those of Express Scripts have more than doubled.

Buzzword

To be fair, Medco has attempted to distinguish itself from the pack. Following a big multistate settlement in 2004, the company now discloses more than it once did -- particularly about rebates from drug manufacturers -- and declares itself the most transparent of the giant PBM players.

Medco says, quite simply, that transparency "makes good business sense." And several Wall Street analysts, who portray the company as more transparent than most, seem to agree.

But skeptics feel that many PBMs have simply started using a buzzword that customers like to hear.

"Everyone talks about transparency," says Rick Goebel, vice president of sales and marketing at Pharmacy BenefitDirect, another smaller PBM that promises complete transparency to its clients. "But I think it's all just kind of a sham."

On the one hand, Goebel says, many PBMs have in fact started responding to customer demands about rebates on expensive name-brand drugs. But on the other, he says, those same PBMs have shifted their focus to generic drugs where -- because of secret pricing schemes -- they can pocket even bigger profits in the end.

Caremark didn't answer questions for this story, and Express Scripts declined to participate.

But Goebel has co-authored an entire study about how the generic game supposedly works. He says that, over time, brand-name drugs have actually become "loss leaders" for PBMs because of the deep discounts the companies now pass on to their clients. He says the PBMs now focus on pushing generic drugs, where they profit from big pricing spreads.

For prescriptions filled at retail pharmacies, he says, PBMs pay a fixed "maximum allowable cost" and then charge their clients a higher price. And for prescriptions filled at their own mail-order pharmacies, he says, PBMs abandon MAC pricing altogether and pocket even bigger spreads.