Welcome to our NEW Fast Five Series.
Got 5 minutes (or less)?
We’re sharing 5 industry insights about pharmacy benefits.
In our latest post, our Vice President of Sales, Jonathan Har-Even, shares his outlook on the industry and where we need to go next.
Read Time: <5 minutes
The pharmacy benefit management industry is broken. It largely rewards volume over value and opacity over transparency, without keeping patients’ clinical and financial interests in mind. An overwhelming majority of prescriptions are still processed through a “traditional” PBM – an octopus-like middleman that has its arms in your pockets and its legs over your mouth.
Most PBMs have a profit-maximizing playbook that makes football game plans look simplistic. Rebates, spread pricing, claw backs, and brand switching are all out there. Pricing mechanisms such as AWP, NADAC, MAC are terms so obscure that Eminem couldn’t even rap them. Doctors receive little information to write informed prescriptions. The FDA cannot properly vet thousands of new specialty drugs while keeping costs under consideration. Employers rely on conflicted advisors who resell inferior PBM solutions to their clients. The reality is that the games PBMs play have negative real-life consequences for patients’ health and savings.
At this point, we must admit the PBM infrastructure in this country is crumbling. It won’t do us any good to rehash the obvious fact that things are broken. That martini has been stirred.
To combat these issues, companies, including us, have adopted pricing transparency and pass-through. Let’s look at 5 ways the PBM industry can continue to improve and promote better healthcare for all:
1. Pass-through and transparency are non-negotiable requirements. They play a key role in PBM value.
There is so much low-hanging fruit in this industry that doing the right thing will produce meaningful results. We see the right thing as providing the least expensive, most effective therapy to patients in a pass-through environment. Several PBMs are already doing this, and we applaud them for it. Optimizing value for patients and plans should always be the North Star.
The question we have been asking ourselves lately is “What comes after transparency?” After pass-through solutions finally surpass traditional ones? After legislation and regulation holds PBMs accountable? After buyers and payers sniff over-the-counter smelling salts and wake up from the rebate trance? After companies and plan administrators have gifted fair pricing to their members? What is the PBM of the future? How does it unlock value?
As much as I like discussing pass-through, the fact is that doing the right thing is not always enough. While transparency and pass-through are non-negotiable components of clinical and financial value, they are only part of the solution.
2. How do PBMs unlock value?
The triple aim of healthcare – improved outcomes and patient experience with lower costs – is the simple framework through which PBMs can optimize their role.
I’ll add a 4th aim as well – clinician satisfaction – considering its impact on the other three. However, it is in a rapidly deteriorating state.
Today, much of what best-in-class pass-through PBMs do lower costs. Their goal is to focus on the right drug at the lowest net cost with enhanced clinical support and criteria. Pass-through PBMs are fully aligned with the interests and incentives of plans and members. Since costs are measurable and of primary importance, it is no surprise that pass-through PBMs focus their programs on cost savings. But these costs savings cannot be at the expense of the clinicians that our patients rely on. If your local pharmacy where the pharmacist knows all the patients’ names can’t stay in business because their acquisition cost exceeds their reimbursement cost, we are losing a critical component of the care continuum. Once we venture beyond cost into outcomes, experience, and clinician satisfaction, things become more uncertain.
3. Pass-through PBMs offer both strengths and weaknesses.
Steve Jobs thought that in most cases, strengths and weaknesses are two sides of the same coin. A strength in one situation could be a weakness in another, yet often a person cannot shift gears to see both. I think similarly of the predicament that pass-through PBMs face.
Our strength is that we can lower costs through transparency and pass-through arrangements and prove it. But there is more to it than that.
How do we show that our solution is more than just a set of cost-containment programs? How do we prove that our focus goes beyond unit cost, and we are improving other aspects of the quad aim? How do we talk about the human element and the health element without delivering an empty promise with the sheen of a Super Bowl commercial, as so many healthcare organizations currently do?
4. PBMs can help pharmacists reach their full potential.
It is wild to think of a future where the majority of pharmacy claims are not processed through a traditional PBM arrangement that weighs down pharmacies, pharmacists, plans, and plan members with financial and clinical hardship. PBMs could be an important part of the solution by using their technology and market network to improve care and strengthen stakeholders. Pharmacists and pharmacies are central to the United States healthcare experience, yet many are tasked with responsibilities below their education level. In some scenarios, performance metrics are putting pharmacists and patients at risk. The data is compelling:
- More than 90% of the U.S. population lives within 5 miles of a pharmacy.
- There are 311,000 pharmacists in the U.S.
- There are 142,720 primary care physician businesses in the U.S.
- There is currently no shortage of pharmacists as there is with PCPs.
- People with chronic conditions routinely see pharmacists more than their doctors.
- Pharmacist education includes clinical training as well as dispensing medications.
Helping pharmacists deliver meaningful care depends on implementing right-size reimbursement methods and designing platforms that support pharmacists and members and help pharmacies, particularly community ones, leverage their relationships with members. Nikhil Krishnan makes some great points in my favorite piece on this topic. Regulatory support is critical on a state level. As Nikhil points out, Florida and Ohio are already expanding pharmacists’ roles and offering reimbursement. “Six states have passed laws that require certain insurers to pay pharmacists for services within their scope of practice if they are covered when performed by other healthcare providers,” Krishnan writes. “Ohio’s law gave insurers the option of paying pharmacists and that was enough to get the ball rolling”.
5. PBMs can usher in value-based pharmacy.
There is no denying that people shudder when they hear the acronym PBM. It is understandable given that PBM arrangements are paper shackles. What if well-intentioned PBMs could change this dynamic and put the “M” (management) back in to the PBM model?
Here is a hypothetical 3–5 year plan that uses lowest net cost as a foundation and builds out a platform for payors, members, and pharmacists:
- Establish a lowest net cost, pass-through solution.
- Implement clinical and formulary management programs.
- Leverage integrated cash programs (e.g., GoodRx).
- Shift medical specialty to PBM management.
- Partner with leading diagnostics and testing companies to help pharmacies and pharmacists establish themselves as clinical resources.
- Collect data to measure outcomes and compare new versus legacy costs,
- Work with state regulators to advocate for expansion of pharmacists’ roles.
- Work with community pharmacy integrated delivery networks to coordinate care and reimbursement.
- Provide reimbursement platforms and other tools to help pharmacists manage patients and optimize revenue.
- Partner with payors to drive awareness and patient volume to participating pharmacies.
- Institute ongoing requirements for members to receive high-cost drugs.
PBMs will still have to do a lot of work to convince pharmacies and pharmacists that they are worthy partners but not necessarily as much as one might think.
A moderate level of engagement and support with a friendly contract will be more than what most PBMs are offering today. Our opinion is that pharmacies, especially community ones, will embrace positive collaboration.
As an owner of a community pharmacy recently told me, “I am clearly helping patients with all sorts of issues and losing money on them, yet their doctors are unavailable and we’re the only alternative. We’re already doing the work, and there’s so much more we can do.” Maybe pharmacies are the local clinics we’ve been looking for?