Pharmacy Benefit Managers continue to control the Pharmaceutical landscape. In spite of ongoing efforts from the Federal Trade Commission, PBMs are standing strong in their position as prescription drug middlemen — impacting the access and affordability of medicine.
The FTC reminds us that, “The largest PBMs are integrated with the largest health insurance companies and wholly owned mail-order and specialty pharmacies. They influence which drugs are prescribed to patients, which pharmacies patients can use, and how much patients ultimately pay at the pharmacy counter.”
Pharmacy Benefit Managers’ practices lead to rising costs for payers and patients, seemingly with no end in sight. Harmful PBM practices include:
- Charging fees and clawbacks to unaffiliated pharmacies
- Steering patients to PBM-owned pharmacies
- Potentially unfair auditing of unaffiliated pharmacies
- Use of complicated and opaque pharmacy reimbursement methods
- Negotiating rebates and fees with drug manufacturers that may skew formulary incentives and impact the costs of prescription drugs
The unfortunate reality is, PBMs continue to win, while employers and patients fail to manage increasing pharmacy costs. Thanks to recent advancements, middlemen have been close to eliminated in all other industries – except Pharmaceuticals.
Year after year, PBMs grow more profitable and powerful. Below are ways the Big 3 PBMs may take advantage of you and your employees and why you need to reconsider your Pharmacy Benefit Manager.
- Rebate-Driven Formularies – Instead of ensuring your plan covers the best value drug (both efficacy and cost) it is covering the drug that provides the highest rebates. For example, Duexis is on most formularies, when it’s Advil and Pepcid in one pill – and it can cost over $800 per month. PBMs may offer some formulary customization, but their top revenue drivers are off-limits.
- They Keep the Rebates – PBMs retain a portion of every manufacturer rebate. The kicker? That percentage is confidential. Plus, they keep 100% of OTC rebates and most POS rebates.
- Spread Pricing – PBMs pay retail pharmacies less than what they bill you for. They keep an average margin of 20%.
- Mail Order Abuse – Are you familiar with the prescription auto-fill features? Well, early fill means that employees are begin sent drugs they’re no longer taking and accumulate 40 extra pills per year.
- Specialty Drugs – The Big PBMs approve 97% of specialty drugs. This contributes to a large portion of medical cost inflation. A third-party review of clinical appropriateness reveals that only 67% of drugs should be approved.
- Reclassifying – Your PBM can reclassify generic drugs as Brand unless explicitly addressed in your contract. How does this work? They pay the pharmacy the generic fee and then charge you the Brand fee.
Now that we’ve outlined how some Pharmacy Benefit Managers exploit employers and patients for their own benefit, let’s address what you can do about it. There are a handful of Transparent PBMs in the market and we are proud to work with them.
By switching to a trusted, transparent PBM, employers can save 15-25% on their pharmacy spend, which adds up to 5-10% of their total medical spend. What makes a PBM transparent?
Here are key features you need to know:
- Rebates – 100% of rebates go to the employer. The PBM keeps nothing.
- Contracts – Simple and transparent contracts are key. You shouldn’t need a team of lawyers to make sure you’re not getting ripped off.
- Formulary – The formulary is completely customizable and initially based on best-value recommendations.
- Revenue – A transparent PBM’s only revenue stream is a monthly administrative or per-claim fee.
- Spread – There’s no spread. Plain and simple. You’re charged the exact same price they pay the pharmacy.
- Audit Rights – You have the right to audit them at any time with minimal notice.
- Specialty Drugs – You may bolt on a third-party review vendor for specialty drug approval.
- Clinical Review of Medication – To provide members with the best medication at the best cost, executing a clinical review of high-cost medication ensures there is not a more cost-effective and appropriate medication available.
As you re-consider your current PBM, we suggest taking into consideration the opportunity to source drugs internationally. Prescription drug importation allows for more medication options and flexibility with prescription costs. At Totem, we’ve vetted the best international pharmacies in the world, and know the importance of incorporating an international pharmacy into your ongoing strategy.
Transparent Pharmacy Benefit Managers paired with international pharmacies are the key to getting your employees the medication they need at an affordable cost, without surpassing your budget. It’s time to re-evaluate your PBM. If you’re looking for support or guidance when handling your employee benefits plan, connect with the Totem Team today.
