PBMs, or Pharmacy Benefit Managers, get a lot of attention in employee benefits plans, and for good reason. Prescription drugs account for 30, 40, or even 50% or more of a group’s medical claims, and are a huge driver of rising healthcare costs for employers and employees. If you aren’t paying attention to your prescription drug costs, you have a huge blindspot and you and your employees are likely paying more in premium than you should be.
Since every health plan works with a PBM, employers and consultants have to work with a vendor who will help them manage drug costs and reduce them over time. If a group does not proactively manage its drug spend, the group will pay more and more for medications as medical trend, new specialty drugs, and increasingly opaque supply chains all contribute to increasing costs.
Antonio Ciaccia, CEO of drug pricing research firm 46brooklyn Research, conducted a recent Q&A where he addressed some key concerns with pharmacy benefits managers and the role they play as middlemen in the complex and costly supply chain for prescription drugs. Specifically, he touched on recent lawsuits against PBMs like how Centene agreed to pay out $143M to settle a lawsuit brought by Ohio.
The issue stems from the fact that while pharmacies were being paid very low reimbursement rates for Medicaid programs, the state wasn’t seeing much in savings. The state of Ohio then conducted an audit and found PBMs earned $244 million in the difference between what they were paying pharmacies and what they were billing the state.
Where did this start? Originally, PBMs existed to handle transactions between the pharmacy and the employer and rein in drugmakers, wholesalers, and pharmacies. But over time, they’ve evolved (and arguably mutated) into enormous entities which are also mail-order pharmacies, specialty pharmacies, and insurance companies even.
In response, public agencies and large employers are saying “no longer” to doing business as usual and instead, they’re starting from scratch by building new relationships based on predictability and transparency.
A PBM isn’t good just because it’s transparent; a quality PBM has to deliver low net costs and good access to the real end users, the employees of employers. One example of this new future is the Mark Cuban Cost Plus Drug Company and another is EmsanaRx.
The Mark Cuban Cost Plus Drug Company is a new entry founded in part by Dallas Mavericks owner Mark Cuban which seeks to offer the lowest net cost possible to consumers.
EmsanaRx is a PBM created by the Purchaser Business Group on Health, a coalition of the largest employers in the country who are focused on reining in high healthcare costs with a more aligned and altruistic entry into the PBM market.
One of the key underlying issues with our dysfunctional health system that delivers high costs to employers is the misalignment of incentives. PBMs have grown and evolved over time to be more vertically integrated and the market has consolidated, so employers have to give special attention to their drug costs and ways to reduce them over time.
Another issue with drug prices is that the drug market is exempt to the federal Anti-Kickback Statute. In practice, this means drug makers can pay a PBM in order to get a drug listed on their formulary and eventually prescribed to patients. Arguably, this could be considered the practice of medicine.
And just like with chargemaster prices being completely disconnected from the cost of healthcare services, formulary prices get artificially inflated to the point that they have little connection to the actual cost of that drug. Employers and employees end up paying the bill for these fictitious drug prices.
At the end of the day, employers can protect themselves if they push for transparency and alignment. Your consultant should not make more money because your costs increase. Your PBM should present clear accounting for the drug prices you pay. Creating a more accessible and affordable healthcare system depends on the transparency and alignment we put into our group health plans.