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How Pharmacy Benefit Managers Lower Prescription Drug Prices

Pharmacy benefit managers (PBMs) may provide significant advantages to payers looking to lower prescription drug prices.

PBMs provide payers an opportunity to lower prescription drug costs

Source: Thinkstock

By Thomas Beaton

- Payers in both the private and public sectors require new strategies that offset the rising cost of prescription drugs.

Pharmacy benefit managers (PBMs) are professionals that administer prescription drug plans for payers, employers, and CMS programs with the goal of lowering prescription drug costs, improving convenience, and ensuring patient safety for payers and their beneficiaries.

As healthcare payers seek more efficient and effective ways to manage high prescription prices, how can PBMs maximize return on investment while improving beneficiary satisfaction?

Negotiating drug rebates from manufacturers and discounts from pharmacies

PBMs obtain discounts on drugs for health plans and beneficiaries through negotiation and administration of drug manufacturer rebates and discounts from retailers.

Because PBMs have direct access to manufacturers and pharmacies, they are able to negotiate discounts from wholesalers and purchase discounts from drug developers.

PBMs also communicate with manufacturers when health plans propose alternatives to existing purchasing programs and contracts.

“Competition among drug products depends on the number of alternative therapies available within each therapeutic class,” says the Pharmaceutical Care Management Association (PCMA). “In classes where several products may be considered therapeutically equivalent, PBMs can negotiate with drug manufacturers for higher rebates, which in turn benefit patients and payers.”

The potential ROI of drug rebate and discount negotiation could be significant for payers, a recent report indicates. Some of these prescription drug cost savings include a 40-50 percent annual savings on health plan drug costs, a $941 reduction on costs per patient annually, and save $6 on every $1 spent for PBM services.

Promoting generic drug and affordable brand-name medication use

Increasing the use of generic drugs that are comparable to more expensive brand name drugs can lower costs for health plan sponsors and consumers.

“Generic drugs are important options that allow greater access to healthcare for all Americans,” PMCA said. “They are copies of brand-name drugs and are the same as those drugs in dosage form, safety, strength, route of administration, quality, performance characteristics, and intended use, but at a lower cost.”

PBMs implement a variety of solutions that help payers implement generic utilization into health plans, including cost-sharing on generic drugs, promotion of generic incentive programs, and the use of home delivery and mail-order pharmacies.

Promoting home delivery and affordable pharmacy networks

PBMs also help payers through the use of home delivery medication services and integrated pharmacy networks to improve prescription drug access and quality for beneficiaries.

An integrated pharmacy network is a group of pharmacies and retailers that compete to sell drugs to health plan beneficiaries. The competition keeps the rising costs of prescription drugs down while giving PBMs more negotiating power.

Home delivery medication services also optimize the process of purchasing prescription drugs for consumers, which may translate into payer savings.

“Health plans and employers offer their members and employees the option of lower copayments on 90-day supplies of medications if they choose home delivery,” PMCA said.

“This provides significant cost savings for both consumers and payers. Mail-service pharmacies are able to keep prescription drug costs down since they are more efficient than other types of pharmacies and have lower overhead costs.”

Data gathered from the Office of the Inspector General and CMS suggests that home delivery services are expected to save payers and consumers $59.6 billion over the next ten years. Delivery of medications may also save payers 16 percent more than the use of brick-and-mortar pharmacies.

Improving medication adherence

PBMs assist payers with improving prescription drug adherence, which results in more appropriate treatment for beneficiaries and less payer spending on drugs that are not actually used.

In order to make sure beneficiaries are actively taking their prescribed medication, PBMs work with specialty pharmacies to identify which patients struggle with self-administration of drugs, and then target these patients with enhanced education and outreach.

According to research from the National Institutes of Health, non-adherence for drugs that can benefit patients with costly chronic diseases is partially attributed to a lack of education and communication on a drug's’ benefits. Using PBMs to reduce gaps in patient engagement and education can improve adherence rates.

Payers that can effectively capitalize on the advantageous price-lowering solutions offered by PBMs may stand to benefit in the form of lower prices for beneficiaries and lower costs prescription drugs.

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