Benefits professionals can take action on their own by
familiarizing themselves with all PBM solutions available, and how clinical
programs impact the bottom line.
By Michael A. Perry | June 14, 2019 at 11:59 AM
Over the last year, state and federal
policymakers have been vocal regarding the need to curb rising prescription
costs for Americans, as well as the importance of increased transparency in the
health care industry. Throughout this dialogue, pharmacy benefit managers
(PBMs) have been highly criticized for their masked revenue streams, which
impact costs for employers, patients, and the nation.
The current administration and the Department
of Health and Human Services, have proposed changes to one such source of revenue, the current
drug rebate system from which many PBMs derive some of their profits.
However, the root cause of rising costs is not
confined to rebates. Today, the United States incurs $750 billion in health care waste, while medical
errors, including inappropriate and dangerous care, are the third leading cause
of death. A PBM industry focused on profits rather than patients compounds
these problems. They must change and start focusing on better patient care.
Benefits professionals can take action on
their own by familiarizing themselves with all PBM solutions available, and how
clinical programs impact the bottom line.
The problem with the traditional PBM model
If rebates are not the only source of rising
costs, why do they receive so much attention? In part, it’s because they are an
attractive target that has a direct impact on costs. Rebates are paid to
pharmacy benefit managers by drug makers in return for favorable placement of
their products on the PBM’s formulary. Often, rebates cover as much as 40
percent of the drug’s list price. Some believe that this creates an incentive
for drug manufacturers to raise list prices, which can hurt patients at the
pharmacy counter in the form of higher out-of-pocket costs.
Although they are meant to make drugs more
affordable, rebates do not typically reach the patient. Many PBMs retain some
(or all) rebate dollars, which can end up costing patients and their employers
(plan sponsors) money. Rebates can even incentivize PBMs to promote brand name
drugs with a generous rebate over less costly generic alternatives.
Other hidden revenue streams help to
illustrate additional issues in the PBM industry. Many PBMs engage in “spread
pricing,” wherein they bill plan sponsors for a drug at one price, then pay a
lower price to the dispensing pharmacy and retain the difference. The plan
sponsor and benefits pro working on their behalf may never see the actual cost
of the drug, making it difficult to determine if they are overpaying. In fact,
spread pricing and resultant overpayment was a driving factor behind sweeping
changes to how the state of Ohio intends to handle pharmacy benefits for
its nearly 2 million Medicaid enrollees.
To say transparency is lacking in the PBM
industry is an understatement. Rebates and spread pricing only scratch the
surface of the pricing games that are played. Many pharmacy benefit managers’
interests are not aligned with those of patients and plan sponsors. Hidden
revenue streams often lower incentives that ensure appropriate drug utilization
and reduce waste, as PBMs typically profit from each prescription filled. While
this can provide stellar returns for shareholders in the form of higher PBM
stock price and dividends, patients and plan sponsors – the very people PBMs
are meant to serve by lowering costs – are left behind.
Pay for performance
Not until PBMs are held accountable for their
performance will patients and plan sponsors truly see a reduction in waste and
inappropriate care that lead to savings. Pay-for-performance programs promise a
way forward to better address client and member interests.
The success of a PBM should not be based on
its ability to deliver large rebates. Instead, the true measure of an effective
PBM is its ability to serve patients and plan sponsors and lower overall health
care costs. Under a pay-for-performance program, the PBM guarantees the total
plan pay amount (the plan sponsor’s bottom line for amount paid on covered
prescriptions). The program also puts the PBM on the hook if it fails to
perform and meet those guarantees.
In order to ensure PBM performance year after
year, the PBM must practice true transparency, align its interests with plan sponsors, and
put patients first. This requires a strong clinical focus that reduces
inappropriate drug utilization while still ensuring patients have access to the
medications they need.
PBMs should only be rewarded when they fulfill
their commitments, not each time they process a claim. With
pay-for-performance, a PBM’s financial success is directly tied to its ability
to improve health outcomes and deliver plan savings while providing the highest
quality service. This is the real change clients are seeking in an industry
rightly seen as overly complex, confusing, and opaque.
More robust clinical programs
At its heart, pay-for-performance is about
looking beyond the rebates and discounts offered by the PBM. Effective
solutions to rising drug costs rely on comprehensive, robust clinical programs.
These can dramatically reduce fraud, waste, and abuse (FWA) and improve health
outcomes, which ultimately leads to increased savings for patients and plan
sponsors, as well as improved employee productivity for clients. Following are
a few examples of how strong clinical programs can help reduce overall health
care spending:
·
Point-of-sale
review: This tool is
intended to promote safe drug utilization. All PBMs use some form of review at
the point of sale, but not all of these programs are equally effective. Strong
point-of-sale reviews increase patient safety by preventing inappropriate
drug utilization instead of identifying it after the fact. This helps reduce on
harmful complications and FWA.
·
Pharmacogenetics: A study of how genetic factors influence
the way the body processes medication, pharmacogenetics can prevent the use of
contraindicated or inappropriate medication. When PBM claim systems integrate
pharmacogenetic test results into comprehensive health profiles for members,
this information can be applied at the point of sale. It allows pharmacists to
work with prescribers to find the most effective medication for a patient while
minimizing side effects. This reduces costs for patients and plan sponsors by
achieving more favorable health outcomes.
·
Coordination
of care: Pharmacists at
both the PBM and the pharmacy need access to tools that allow effective
communication with all of a patient’s prescribers. This ensures that patients
receive the care that’s best for them based on clinical considerations such as
health and medication history. Pharmacists are one of the most underutilized
resources in health care, and PBMs should help, not hinder them in their work.
This ultimately lowers drug trend year after year by helping patients get and
stay healthy, reducing dependence on medications.
Look beyond the spreadsheet
Spreadsheets often serve as the basis for PBM
comparisons. However, there is more to consider than just these superficial
financial figures. Standard spreadsheets generated by the proposal process
present a range of rebates and discounts derived from differing definitions of
transparency, pricing games, and hidden profit centers. They fail to account
for the impact that improved member health outcomes and reduction of
inappropriate or wasteful drug utilization have on the plan sponsor’s (and the
patient’s) bottom line.
The pay-for-performance program we’ve
described offers a much clearer comparison.
The PBM guarantees the total plan cost. It
accounts for all moving parts that affect patient care and prescription drug spending. After all, what difference do
individual drug discounts and rebates make if the number of claims continues to
climb each year due to wasteful, fraudulent, and inappropriate drug
utilization?
Knowing all the hidden and published PBM
profit centers, as well as emerging practices in pharmacy benefit management
and the best method for PBM comparison, can help benefits professionals make
smarter decisions that will help their clients and their members in the long
run.
Michael A. Perry is the President of BeneCard PBF. Michael
and his team have engineered a purely transparent PBM model along with a pure
pass-through offering and a pay-for-performance PBM product. BeneCard PBF’s
“member first” approach centers on clinical programs that drive costs down
while helping improve his member health outcomes. BeneCard has demonstrated
consistently superior service with an average overall satisfaction rating of
9.52 out of 10 since 2014 in PBMI’s PBM Customer Satisfaction Survey,
reflecting its passion for creating a better PBM experience.
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