Endangered PBMs’ Best Option for the Future

Pharmacy benefit managers (PBMs) have been under fire for some time now. Many of these middlemen have been retaining the rebates they’re expected to share with insurers—so much so they’ve garnered national attention.

States have been launching investigations into and taking legislative action against PBMs since 2013. Now the federal government is getting involved, the Trump administration having announced in January a proposal to eliminate the protections that have historically allowed PBMs to pocket much of the “savings” they negotiate.

PBMs are panicking. OptumRx, for example, recently sent letters to drug manufacturers asking that they give them many months’ notice if they plan to lower drugs’ list prices. They also asked to keep their current rebate rates.

These are the death throes of an expiring model. So, what comes next?

The answer is transparent pharmacy benefits (TPB). With TPB, employers can hold PBMs accountable and access employees’ prescription data. Employers don’t need to completely redesign their health plan, just modify an existing element.

This is essential for a number of reasons. First, prescription prices keep climbing, and as a result—according to a study from the Annals of Internal Medicine—people with diabetes on high-deductible health plans are delaying care longer than those on low-deductible plans.

To reverse this trend, employers must understand what PBMs have been doing—driving up prices by keeping them in the dark or misinformed. Deception stems from the Average Wholesale Price (AWP), the average price pharmacies and retailers pay drug wholesalers and that PBMs base on discounts. The higher the AWP, the greater the PBM discount.

However, per-unit drug prices can vary greatly from the AWP, and PBMs can create a “spread pricing” situation where they charge health care payers more than what the pharmacy is asking. PBMs then keep the difference unbeknownst to many employers.

But with TPB, employers have insight into their employees’ drug needs and costs. With this, they can make informed coverage decisions by researching and comparing price and questioning their PBM if something’s suspicious. Everyone wins: Employers and employees save, and transparent PBMs live to see another day.

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