Justifying PBM Roles
David Lansky, PhD, President and CEO of the Pacific Business Group on Health (PBGH), questions whether PBMs will be able to prove that their performance, transparency, and effectiveness work well enough to justify their role or whether other services and structures will emerge.
On the other hand, he said that PBM functions are valuable and that his members want these services at the lowest cost to provide the right medications with the least hassle.
“Ultimately, the responsibility of total cost of care should be in the hands of a care system. If they are going to manage a population, they need to manage all the necessary resources for achieving the best outcomes at a reasonable, competitive cost,” Lansky says.
“With drugs now accounting for close to 25% of total spending, it’s essential that the care system have the tools and responsibility to manage medication spending, as well as other medical services,” he continues.
“Employers need a business partner with pharmacy expertise who understands opportunities and oversees the business,” he says. “It’s a clinically complex area. No employer wants to be in the middle of deciding whether an employee should receive a certain drug.”
Employers Target Inefficient Marketplace
Employers are taking matters into their own hands. The Health Transformation Alliance (HTA), formed in 2016 and comprised of close to 40 major private sector employers, is one of them. It is working collaboratively to break with costly and inefficient marketplace practices to achieve better outcomes; sharing data; and eventually purchasing care collectively to lower prices on drugs and services.
Although HTA has signed on with CVS Health and OptumRx, its CEO Robert Andrews says it “will be a substantially different arrangement from typical PBM contracting” and include transparency on rebates and discounts, audit rights to review what its PBMs are doing, and participation in formulary decision making.
In 2003, Self-Insured Schools of California (SISC), a PBGH member, created a new plan called Consumer Share, which requires members to share in more of the cost of brand-name drugs when effective generics are available.
By 2011, SISC realized it was difficult to manage Consumer Share, so in partnership with an industry consultant, the organization chose a new PBM, Navitus. Instead of relying on better discounts and rebates and tiered copayments, SISC emphasizes step therapy, prior authorization, and in some cases, eliminating certain drugs from formulary. This new relationship has resulted in an average increase of drug costs of 2.8% annually from 2014 to 2018—far lower than the 11.8% average from 2010 to 2014.
Full Transparency, Pass-Through Model
Jim DuCharme, CEO and President of Prime Therapeutics believes his company has something different to offer from other PBMs—it is anchored in full transparency and has provided a pass-through model of drug costs in real time for the past two decades. He is optimistic that purchasers will eventually move to Prime Therapeutics for those reasons.
"As a pass-through model, we provide discounts, rebates, and other revenue to purchasers and receive a flat administrative fee for our services instead of letting the spread cover those costs,” DuCharme said. He expects other PBMs to follow Prime’s model (See Table 1).
“More integration is needed between PBM and plans,” DuCharme says. Plans like Anthem, Inc., are examining their PBMs more closely in this area. “Not having it is one reason why Anthem is leaving Express Scripts.”