By: Tom Cassady, CRIS, CWCA / Senior Sales Executive
When a plan sponsor, which is typically self-insured, carves out pharmacy services, it chooses a PBM to administer prescription drug benefits. That PBM is separate from the provider contracted to deliver the medical benefit. The carved out model has many potential advantages to a plan sponsor such as cost-reduction, flexible plan design, a greater understanding of all elements of the pharmacy plan, and transparency to confirm all of their benefits promised are being delivered.
76-percent of the PBM market is controlled by three companies: Express Scripts, CVS Caremark, and OptumRx. While contracts are viewable by all parties, contractual language can be written elusively to hide actual costs and employer/member rebate values. Sometimes, discounts from the manufacturers are not listed as “rebates,” even though they still function as such.
Employer-focused PBMs work on a different compensation model, which usually involves a fee. This eliminates any financial conflict of interest. It also includes no additional margin made on favorable tier placements as it is a 100-percent pass through-pricing model (i.e., rebates received are passed through to the plan sponsor).
Plan sponsors are charged the same price the pharmacy is paid, no spread, or margin. There are no additional fees for prior authorization, step therapy, drug utilization reviews, or specialty programs.
Moving to an employer-sponsored PBM could save 25% or more on your total pharmacy spend.
- Spread Pricing: the difference between the amount the PBM pays the pharmacy and the amount it charges the payer. It is the amount the PBM is keeping off of every drug transaction
- Pass-Through Pricing: What the drug costs are what the member pays. All discounts and rebates are passed through to the member. Instead of the PBM making money on the drug spread pricing, they make their money through disclosed fees.
Large PBMs say their market share and buying power helps gain bargaining position and reduce the cost of drugs for members, but in reality, is that cost savings being passed on? Or is it being kept as a profit for the large publically traded PBMs with traditional compensation models?
While employers value the services their PBMs provide, they also worry about PBM vendor alignment with their own goals, as well as trustworthiness and satisfaction. Part of the challenge is that many employers lack internal expertise and resources to manage their prescription benefits, so they heavily rely on advisors and their recommendations.
So, when considering a PBM or if you are looking to manage your PBM better, here are some crucial steps to take.
- Start with information: Educate yourself or ask your broker partner for pharmacy benefit management trends and business models.
- Always ask questions: Talk and hold the PBM accountable for responses to your concerns.
- Release concerns with rebates: It is typically much more financially advantageous to have participants on a lower-cost drug than to worry about losing discounts you used to have or can have.
- You’re not alone: Seek out insightful advice and invest in finding a broker who understands your business priorities!
- Look beyond the traditional: Consider smaller, genuinely transparent PBMs that offer flexibility and customization of all aspects in your plan.
- Stay confident: Managing pharmacy benefits isn’t as hard as it appears on the surface. You need to get and stay involved if you aren’t 100 percent comfortable with your PBM.
If you are struggling with your PBM or are curious about questions, please contact your Horton team member via their direct dial number, their email address, or to be directed to your team member call us at 800-383-8283.
Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.