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Study: Employers Should Revisit PBM Strategies

Employers may have the market power to demand transparency from pharmacy benefit managers.
Published Online: Oct 06,2017
Laurie Toich, Assistant Editor
With healthcare reform a top priority for Congress and the Trump administration, each stakeholder in the pharmaceutical supply chain is being put under the microscope and lawmakers have proposed legislation to regulate some of these entities.

The Midwest Business Group on Health (MBGH) recently released a study that urges employers to improve the efficacy and value of pharmacy benefit programs to lower costs and increase transparency.

The authors of the study call on insurers to understand how middlemen increase drug costs in the supply chain and develop ways to reduce costs and drive efficiency, according to the study.

These middlemen—known as pharmacy benefit managers (PBMs)—have recently come under scrutiny for numerous reasons, including charging retroactive direct and indirect remuneration fees to pharmacies.

“As fiduciaries, employers have a duty to be ‘good stewards’ of how premiums are used to fund care for employees and beneficiaries,” said author Cheryl Larson, MBGH vice president. “Most PBM arrangements are complex, making it difficult for employers to identify the true cost of drugs and all the sources of PBM revenue.”

Many stakeholders have said that PBMs are largely unregulated, which can result in a lack of transparency. According to the report, employers should be able to identify and address a lack of transparency related to rebates, co-payment clawbacks, drug lockouts, and other crucial areas. 

“Employers need to know the facts and act to make sure their benefit dollars are spent in an efficient manner and rebates and other revenues are appropriately received,” Larson said. “We’re working with employers and experts now to try to bring these issues to light and come up with the right solutions.”

The authors wrote that employers have a great amount of power and should use their market share to drive PBM reform.

First, employers should ensure that they are using a transparent PBM model that passes money from rebates and discounts to the employer rather than to any other part of the supply chain. PBM revenue should also be disclosed, according to the study.

Many PBMs—including CVS Caremark and Express Scripts—use formulary lists to cut spending on prescription drugs. The report calls for employers to offer value-based designs rather than the traditional methods.

Under this proposal, lifestyle drugs would not be covered, with convenience drugs being split 50/50 and lifesaving drugs or those for chronic diseases would have low to no cost-sharing, according to the report.   

MBGH also suggests that employers hire an independent pharmacy and therapeutics committee to analyze the PBM’s formulary list, quality, and cost to ensure that these aspects are beneficial to patients and not driving revenue.

Currently, most contracts do not allow employers to audit the financial and operational performance of PBMs, but employers should audit practices, including the handoff between supply chain stakeholders and their contracts, according to the report.

Employers should also require that they receive rebates and that PBMs do not engage in co-pay clawbacks.

The authors believe that by utilizing these strategies, employers can help reform PBMs.

“Although employers may have to drag the rest of the system along with them, they need to ask and then demand what they want – because it’s the right thing to do – for our companies and especially for our employees and family members,” Larson concluded.