- As prescription drug costs continue to rise employers should ensure that they have strong pharmacy benefit manager (PBM) accountability measures in place to maximize cost-savings and plan efficiency, according to a report from the Midwest Business Group on Health (MBGH).
Because PBMs earn multiple revenue streams from negotiations between employers and pharmaceutical companies, and can capitalize on rebates that should go back to employers, business health plan administrators should consider reevaluating their PBM arrangements to ensure accountability and transparency.
"As fiduciaries, employers have a duty to be 'good stewards' of how premiums are used to fund care for employees and beneficiaries," said Cheryl Larson, MBGH vice president and primary report author.
"Most pharmacy benefit manager arrangements are complex, making it difficult for employers to identify the true cost of drugs and all the sources of PBM revenue. 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.”
Employers should require price protection on rebates collected by the PBM from manufacturers, disclosing rebates on drugs, retain 100 percent of these rebates, and halt the use of excess co-pays for purchasing drugs, MBGH suggests.
Ideally, the healthcare dollars from prescription drug rebates should roll back into the employer’s health plan and improve beneficiary plan quality, but a PBM sometimes receives those rebates instead.
“Some employers require 100 percent of those rebates to be passed back to them so they can benefit their plan beneficiaries,” MBGH said. “However, many employers do not know they can require a pass-through and in many contracts, and the PBM retains a portion of the rebate to ‘pay for administrative expenses.’”
Other times, a PBMs can purchase a drug for an employer and keep the profits if the co-pay for the medication is higher than the price of the drug. Employers may wish to establish contracts that don’t allow PBMs to retain co-pays, and instead direct the extra money back to the company.
Additional strategies may include performance-based contracting that penalizes PBMs for not meeting certain goals and exercising full auditing rights within PBM contracts to review financial and outcome performance, the report notes
A value-based design, such as those without drug formulary, an employer's cost-sharing for drugs is based on how well a drug helps their employees.
“For example: lifestyle enhancing drugs (e.g. diet aids, cosmetic, ED) are not covered, convenience drugs (e.g. acne, HRT, non-sedating antihistamines) are split 50/50, and drugs for chronic diseases and lifesaving drugs have the lowest cost share or no cost to the patient,” MBGH explained.
Even though prescription drug prices present a unique challenge to employers when providing cost-effective and high-quality care for beneficiaries, there is ample opportunity for to utilize the services of PBMs that drive this goal forward.
“Today’s pharmacy benefits environment is ripe for transformation,” the report said. “Employers are getting close to the tipping point and although it may take some time to experience real change, it will be worth the effort. There are many forward-thinking employers who are already leading the charge with others ready to follow.”