What is a PBM?
A Pharmacy Benefit Manager is a third-party administrator of prescription drugs for health plans. Every health plan has one, but many of us do not know who they are and how they operate. I think we can all agree the cost of prescription drugs is out of hand but get this… in 2017 the largest PBM’s had higher revenues than the largest pharmaceutical manufactures, the middleman made more than the manufacturer!
You read that right.
The big 3 which control about 77% of the market are all owned by Insurance companies. These are Caremark (CVS Health: Caremark and Aetna), Express Scripts (Cigna) and OptumRx (United Health Care). These companies handle pricing negotiations, claims, and distribution of prescription drugs. They also control the formulary which is the list of medicines covered.
For most health plans the cost of prescription drugs makes up 20 to 30% of the overall spend and in many cases is the most rapidly rising cost.
So, what can you do about this?
The first step is to align yourself with an honest independent PBM. Yes, they exist.
Here is an example of just one client and one prescription. When sourced domestically, the best price for the medication we could find was $7,922 however we looked beyond our borders and found the drug for $3,527.06. When sourced through Global Rx, if taken 1x per month, that move saved that employers health plan $52,739.38 annually.
So, what if you have an existing PBM and are not ready to change? There are options.
We looked at another health plan and looked at the top 8 drugs. In looking at those medications we found other ways to source those medications domestically that would save their health plan $162,704.78 annually on just on 8 medications!
This was very eye-opening for us and the client. The savings are there, it just takes a little extra effort and going against the norm using different methods to source prescription drugs.
If you would like to discuss your options to see if there are savings to be hand, please contact us. Our local experts are here to assist you.
Where Bates Hewett & Floyd can help
Once you have a benefits advisor that has aligned incentives and your best interests, it’s time to start where the lowest-hanging fruit is because profiteering is so extreme, yet easy to fix without any noticeable impact to employees.
The dominant big 3 Pharmacy Benefit Managers P(BMs) are all Fortune 50 companies, but interestingly, there isn’t one purely pharmaceutical company in the Fortune 50. How is that so?
PBMs are middlemen between drug manufacturers and pharmacies. In exchange for placement on pharmacies’ formularies, PBMs negotiate rebates and discounts off drug prices with their manufacturers. The problem is most PBMs practice opaquely. Amazingly, we have found 32 different revenue streams PBMs pocket. Rebates are just the tip of the iceberg on PBM shenanigans that transfer money from employees’ wallets to theirs.
With transparent pharmacy benefits, I work with business leaders to access, understand and utilize pharmacy claims data. That requires PBM contracts to make clear you own your claims data as the purchaser of services, and that you have the right to use that data to make informed decisions.