Generic dispensing and substitution in mail and retail pharmacies

Mail-order pharmacies have lower aggregate generic-dispensing rates than their retail counterparts. This fact has been used as evidence of self-dealing that could arise when a pharmacy benefit manager (PBM) is both a plan administrator and a pharmacy owner. Using the aggregate generic-dispensing rate, however, is problematic because it confounds variation in performance with differences in demand. Controlling for therapeutic mix alone explains 87 percent of the apparent difference in aggregate dispensing rates. An alternative measure--one that fully controls for differences in price and indications across molecules within a category--eliminates the discrepancy in dispensing rates.