The Role A Pharmacy Benefit Manager Plays
This middle man between pharmacies, insureds, and drug makers develop lists called formularies for insurance carriers to apply when managing a client’s prescription coverage. These formularies list off the drugs that would be covered by the health plan throughout each course of treatment. They also create lists called maximum allowable cost (MAC) lists that tell drug companies and pharmacies exactly how much the plan will pay for a drug. The list for drug companies is different from the list for pharmacies and the prices on them can be different too.
Though originally created to help process pharmacy claims when insurance carriers couldn’t keep up with the volumes during the rise of the pharmaceutical industry, the biggest problem with using a Pharmacy Benefit Manager (PBM) today is that it has become more of a profit center than a service center. This means that when it comes to the pricing of medications many PBMs operate with their own profit objectives at the forefront.
Because a PBM doesn’t typically disclose to manufacturers how much an insurer is actually paying for a drug and insurers have no idea how much the manufacturer makes selling it, the PBM’s profits are hidden from the public eye. This allows the PBM total control over what the end consumer ends up paying and many feel this is the direct cause of the absurd list price of many drugs after all is said and done.
What Is Being Done?
Up until now PBM’s have managed to dodge the blame for the rapid uptick in drug prices. That no longer seems to be the case, however. At a congressional hearing about drug prices back in February congressmen grilled a lobbyist for the PBM industry about the lack of transparency in their business practices. One such congressmen was Republican Rep. Earl Carter of Georgia, who owns a few pharmacies himself.
Another area of focus by lawmakers is the rate at which the PBMs update their MAC lists. When they fail to update the MAC lists after an increase in drug prices what usually happens is that they pay the same amount to acquire the drugs while the pharmacy pays more. It's considered enough of an issue that 26 states have already passed laws requiring PBMs to update their MAC lists more frequently.
To see any real impact to your health plan premiums though, the prices that your plan is having to pay for members’ prescriptions need to be dramatically reduced right now! Unfortunately, PBMs are quick to deny any wrongdoing, deflecting the charges onto the drug companies who they claim could lower prices anytime they want. It’s the age old battle of “He said, she said” and though concerns still persist, change just doesn’t seem to be coming fast enough for today’s consumers.
Take Back Control Of Your Health Plan's Rx Spend
Who is to blame for rising drug costs is not an easy question to answer. What does seem clear is that the industry is finally realizing that middlemen like PBMs are major contributors to the rising cost of health insurance. Even though this practice has perpetrated so long that many insureds, employers, and insurance brokers think this is normal; change is on the way.
In the meantime, there is a way for you as the CEO, CFO, or HR Officer to help your company address the issue within your own group health plan. If you have the right advisers and healthcare solutions in place, you can take back control over your prescription costs with total transparency and data driven results.
At Summerlin-Roberts we leverage our expertise in cost containment to provide the best possible benefits at the lowest possible price. This results in more sustainable health plans and cleaner budgets for our clients. For more information on seeing what’s behind the curtain and reducing healthcare spend that affect your bottom line, please contact us today.