PBMs Look to the Future

Pharmacy benefits managers have evolved from claims processing to home delivery, managing formulary, specialty pharmacy, and negotiating with manufacturers.

With the ongoing backlash against them-complaints of lack of transparency and regulation, conflicts of interest created through owning specialty and mail order pharmacies, perverse incentives, and rising pharmacy costs-PBMs may decide to make some changes in how they operate.

Susan PilchSusan Pilch, JD, Vice President, Policy and Regulatory Affairs for the National Community Pharmacists Association (NCPA), believes that heightened demand from employers for information about where their pharmacy dollars are going and what their contracts mean could force PBMs to come to the table and address these concerns.

But can the industry live without PBMs, she wondered. “We will always need claims processors-a valid PBM activity-but we would like to move PBMs away from their role as gatekeeper of drugs and their costs,” she said. “We need oversight to hold PBMs accountable, but it’s hard to place demands when you don’t know what PBMs are doing.”

NCPA would like to see a fix for direct and indirect remuneration fees (DIR), pharmacy competition, patient choice, and transparency, she said.

A Future in High-Deductible Plans, Medicare B, and Data

Mark Merritt, President and CEO of the Pharmaceutical Care Management Association (PCMA), predicts that PBMs will assume a more clinical focus as drugs continue to be more complex. “PBMs have been at the forefront of utilization data and, as genomics leads to more personalized medicine, we can provide claims data,” he said.

He also foresees greater collaboration with health plans as more specialty drugs enter the marketplace and with physicians who require access to data about formularies-what specifically is on them and how many are generics versus brands.

Another area of interest is participation in Medicare Part B, an unmanaged space in which PBMs are currently not playing a role. Merritt believes that policy related to bringing down Part B costs would enable PBMs to get involved. “We could drive discounts and help manage the benefit,” he said.

Related article: Why PBMs Lead in Prescription Revenue Growth

In defense of what many stakeholders call a lack of transparency on the part of PBMs, Merritt noted that as plan sponsors become more sophisticated about benefits by consulting experts, more transparency will evolve. However, he believes that transparency has always existed, but that purchasers have failed to fully take advantage of it.

“As efficiencies and benefits improve, there will be more competition by PBMs to provide transparency and reach 100% pass-through of rebates,” Merritt said.

He added that some insurers and employer-sponsored plans are asking PBMs to include inflation protection products in their contracts and setting price inflation benchmarks including risk sharing for gains and losses.
Finally, in, light of the growth of high-deductible health plans, Merritt anticipates that PBMs will address some of the challenges presented by these plans by providing first-dollar payment for preventive drugs even if employees have not reached their deductibles and pass-through manufacturer rebates at the point of service.

Up next: Justifying PBM roles

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.

David LanskyOn 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.

Related article: Express Scripts Lowers Drug Prices For Some Patients

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.”