Highlights:

1. Traditional PBMs profit through negotiated rebates and spread pricing, increasing plan costs.
2. Transparent PBMs pass on rebates and discounts, granting full audit rights to plan sponsors.
3. Technology-driven solutions like proactive mobile alerts combat prescription abandonment and non-adherence.
4. Proactive SMS alerts on lower-cost alternatives help reduce medication expenses for employees.

It’s a common refrain among benefit managers about their pharmacy benefit coverage: They don’t know why their pharmacy spend is what it is. And the utilization data and analytics they receive from their Pharmacy Benefit Manager (PBM) – if any – do not always provide confidence that their plan benefit is delivering the quality and value they’re paying for.
 

What we’re talking about here is transparency – or the lack of it. And while the Transparency in Coverage Rule and the Federal Trade Commission’s (FTC) probe into the major PBMs are good developments, some healthy skepticism is still warranted. Can these high-level initiatives make a difference for employers who offer benefits to their employees?
 
Rather than wait on the government to act, there’s something employers and their brokers can do right now, ahead of any actions that may come: Ask your PBM the right questions to drive transparency for your plan and its members.

How Does the PBM Make Money?

Traditional PBMs aren’t incentivized to be transparent because of how most of them make money: on the drug itself. It’s an open secret that PBMs make huge profits by negotiating “rebates” with drug manufacturers in the name of lowering the price of drugs. The truth is that these traditional PBMs run a “pay-to-play” game, excluding from the PBM’s formulary the drug manufacturers that don’t pay the rebates while driving plan costs higher by including higher priced drugs on the PBM’s formulary in exchange for a rebate.
 
Another common practice is “spread pricing,” where a PBM pays the dispensing pharmacy one price but then turns around and bills the plan sponsor and its members a higher price. Who keeps the spread? PBMs – with pharmacy owners, health plans, and healthcare consumers picking up the tab.
 
Plus, the biggest PBMs own their pharmacies – mail order and retail – and convince plan sponsors to adopt benefits plans that steer plan members to those PBM-owned pharmacies. This extracts value away from local pharmacies and communities, creating pharmacy deserts and even more stress on the healthcare system.
 
The only way to stop these practices and help fix the broken prescription industry is to realign incentives. A truly transparent PBM doesn’t make money on drugs but instead passes through all manufacturer rebates and pharmacy discounts while granting plan sponsors full audit rights to confirm that the PBM did not pocket any of the plan’s money. Benefits managers and their brokers and consultants can start by looking for transparent pharmacy benefit solutions that are not based on plan utilization but rather focus on member engagement and a transparent per member per month (PMPM) fee.

Does the Promised “Transparency” Translate to Employees?

Many pharmacy benefit solutions market themselves as a “transparent PBM.” But the true test is whether employees (aka "plan members") benefit from price transparency. Healthcare consumers are ready for the transparency that PBMs don’t currently offer: In a recent study on pharmacy trends, 90% of consumers surveyed said they would appreciate knowing the price of medication before they arrive at the pharmacy.
 
Let’s face it. Prescribers have many choices of medications they can prescribe, but they don’t know their patient’s benefit design. Most employees and dependents don’t know if the medication just prescribed for them is the best cost alternative under the terms of their benefit plan.
 
So ask: Will our employees know how much their medication will cost before they get to the pharmacy? Does the PBM provide an alert that informs our employees that there is a lower-cost alternative available under their benefit that they could discuss with their doctor?  Does the PBM inform our employees if there is a coupon or other assistance available from drug manufacturers that will help reduce out-of-pocket expenses? A truly transparent pharmacy benefits solution centered on member empowerment can say “yes” to all these questions.
 
With more Americans on high-deductible health plans (HDHPs), consumers will continue to look for alternative ways to pay for their medications, including paying out-of-pocket, which can sometimes result in lower costs. Brokers and consultants should look for pharmacy benefits solutions that include the out-of-pocket cash price vs. the price with insurance so that employees can make the best choice for them, saving themselves and the employer money in the process.
 
With the rise of healthcare shopping and consumerism, consumers are demanding the same purchasing power and options in healthcare that they have in every other facet of their life, and employers and their brokers and consultants can deliver this member empowerment through a transparent consumer experience.

What Technology Has the PBM Adopted to Combat Prescription Abandonment and Related Medical Costs?

Technology is the key to changing how pharmacy benefits work. Just consider medication non-adherence, a huge problem in the U.S., responsible for an estimated annual $100 to $300 billion in unnecessary medical costs. Of the 81 million prescriptions abandoned at the pharmacy annually, half are due to cost. But here’s where employers and brokers can step in to change the story.
 
I hear from clients all the time that they encourage their employees to take advantage of new drug price transparency tools that can provide savings for both members and the plan sponsor. A pharmacy benefit program that incorporates member engagement mechanisms like proactive mobile text alerts can positively influence the risk of medication abandonment and non-adherence in a softer way than prior authorizations and other current methods of many PBMs.

Proactive SMS texts can be used to alert plan members about less expensive drug alternatives for their condition before they pick up their medication, saving them and the plan money. It’s another piece of information consumers are ready for; 73% of consumers surveyed in the same pharmacy study said they would be more likely to talk to their doctor about lower-cost alternatives if they knew the price in advance.

Employers and Brokers Demand More from Your PBM

Even if all the legislative efforts to bring transparency to healthcare succeed, it may not be enough to change the lucrative PBM system. But employers and brokers have opportunities to make an impact. Demand real transparency from your PBM. Ask hard questions: how do they make money? how do they drive transparency for both the plan and its members? and how are they innovating to make healthcare work for everyone? And if they can’t – or won’t? Put them on notice and find a truly transparent pharmacy benefits solution for your plan and its members.

Author Bio

Andrea Pickett is the Chief Customer Officer at Prescryptive Health, Inc. She has over 23 years of experience working in the healthcare and pharma industries.

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