The world of pharmacy benefits continues to get more complicated, and that is unfortunately not an accident.
Pharmacy benefit managers, also known as PBMs, such as Optum, CVS Health, and Express Scripts, cover more than 80% of the American public’s pharmacy needs. Due to their size and control over the pharmacy industry, they can negotiate better deals in their favor from retail pharmacy chains and choose to underpay them. Pharmacy benefit managers can also use their industry control to negotiate higher rebates and administrative fees from pharmaceutical manufacturers.
What does this mean for your organization? PBMs typically give some of this money back to the plan sponsor, but the rest is often kept as profit. The Pharmaceutical Care Management Association (PCMA) said at the 2018 PBM Policy Forum that PBM’s will save more than $654 billion in drug spend over the next 10 years. If they are improving drug spend, why are pharmacy benefit plan costs growing faster than medical?
Pharmacy Benefit Managers: Are they really saving you money on your medications?
Pharmacy benefit managers help organizations save money because they are a less expensive way to get an organization’s employees their pharmacy needs. PBMs push mandatory specialty at their own mail-order facilities and offer deep “incentives” to carve-in their pharmacy offerings. While this sounds positive and reasonable on paper, there is a problem here – no one is holding the PBMs accountable.
The PBM sets the price they pay to retail pharmacies, specialty pharmacies, and their own pharmacies.
In many cases the PBM underpays community pharmacies and can overpay themselves, and there is currently no oversight to these processes. That will hopefully be changing soon based on last month’s unanimous Supreme Court decision. The hope is for this ruling to spur more oversight of the PBM industry not just in Arkansas – where the case was centered – but across the US and eventually by the federal government. These PBM tactics to harm patients by unilaterally underpaying pharmacists must stop, but PBMs also need to be questioned about how rebates and savings are being provided back to plan sponsors.
Most organizations do not have the time or capacity to review their pharmacy claims data in detail to verify what their pharmacy is getting paid, so plan sponsors are often the ones who suffer.
Pharmacy Benefits Consulting Services Example: A Closer Look at Tadalafil
In 2020, Blue & Co., LLC’s Pharmacy Consulting Group started working with a healthcare organization to help them better understand their own pharmacy spend.
The organization’s benefits team has been partnering with the same national consulting firm for many years, but the consultant was not regularly reviewing the organization’s claims data to verify what amounts their pharmacy was getting paid compared to other pharmacies employees could access to fill prescriptions.
Unfortunately, our Pharmacy Consulting Group has seen this before, time and time again. The solution? In order to truly understand an organization’s pharmacy spend, the pharmacy claims data needs to be reviewed on a regular basis. Within a few weeks, the Pharmacy Consulting Group was able to discover a huge gap for the referenced organization.
Our team put together a short case study to help illustrate one of the many games PBMs play in order to generate more profit for themselves.
The drug Tadalafil at the PBM owned pharmacies cost over $3,800. This price is what the PBM chooses to pay themselves and charge the drug cost to the plan sponsor. That same drug at non-PBM owned pharmacies only costs around $200. This illustrates how the PBM is choosing to pay other pharmacies significantly less than their own pharmacy. This one drug – likely only being filled for one patient – was $33,000 more expensive through the PBM’s own pharmacy because the PBM gets to set the price point for drugs filled at their pharmacy.
As you can see in the above graphic, the pharmacy benefit manager paid its pharmacy 20 times more than they paid the other pharmacies. This increases their profit and your organization’s costs. Tadalafil is just one example where the PBM was creating this type of profit for themselves, which is why plan sponsors are pushing back on PBMs.
Generally, consultants and plan sponsors do not have the time or resources to take deep dives into their prescription claims data on a regular basis, but it can come at a steep cost. The next time you discuss your PBM contract and your PBM wants to “incentivize” your organization or force you into a mandatory specialty program, take a closer look at what is being proposed. If you already have a PBM contact in place with this type of language, consider who is looking out for these types of scenarios and contemplate how a comprehensive pharmacy claims evaluation and detailed contract review could save money for you as the plan sponsor and all of your employees.
About the Pharmacy Benefits Team at Blue & Co., LLC
At Blue & Co., LLC, our pharmacy benefits team understands that the world of pharmacy benefits is not transparent or easy to comprehend. Unfortunately, the industry is not set up for organizations to see the benefits, and instead is just focused on taking advantage of this, causing your organization to pay more in pharmaceutical costs year over year.
To learn more about how Blue & Co., LLC can help reduce your organization’s pharmacy spend, please contact Chad Downing.
Download the Case Study: The PBM Profit Game