The Fast Five: Transparency in the Age of GPOs

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We’re sharing 5 quick industry insights about pharmacy benefits.

GPOs began emerging in 2019 and continue to grow. In this Fast Five, we share five insights on transparency in the age of GPOs and what to keep in mind when you are evaluating different PBMs. 

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1. First, it is important to remember why some PBMs are choosing to participate in Group Purchasing Organizations (GPOs).  

The largest PBM players in the industry have each launched GPOs over the last several years. These PBM-owned GPOs work similarly to other GPOs in the healthcare industry. Simply put, they use their purchasing power to negotiate better pricing.  

While the GPO itself may have other financial motivations, entities joining these GPOs are generally focused on one thing: reducing the cost of goods sold. Specifically, a smaller PBM will join the GPO to gain more competitive rebates. The GPO will also perform some or all manufacturer contracting for those rebates.  

Some critics argue that with a GPO involved, the participating PBM’s transparency should be questioned. However, in pointing the finger at the GPO’s members, they are overlooking the real problem with pricing and rebates in the industry.  

Therefore, it is important to remember the why. PBMs are joining GPOs to focus more on their clients and members by pursuing new tactics to compete.  

2. Regardless of GPO participation, what a PBM does with rebates is a critical part of the transparency equation.  

Increasing the competitiveness of rebates is important but passing back 100% of rebates to clients is a critical factor. We encourage finding a PBM that is aiming not just to lower the cost of goods sold for their own profit margins (i.e., retention of spread), but one specifically aiming to lower the cost of goods sold for their clients by passing those improvements through.  

Further, we recommend evaluating PBMs with the following in mind: 

• While rebates are a piece of the financial puzzle for PBMs, it is still vital to work with a PBM partner who does not chase rebates. 

• Instead, focus on finding a PBM partner that chases lowest net cost. Sometimes the clinical and financial value, including rebates, offers the lowest net cost. 

• As in most business relationships, there may be confidential terms between the PBM and the GPO; however, is the PBM sharing specifics of their financials and operations outside of this? For example, do they share all their sources of revenue?  

As a testament to rebate transparency, EpiphanyRx and our parent company, Navitus Health Solutions (Navitus), provide rebate reporting at the NDC level and offer data other PBMs will not. 

3. Client-focused solutions and the “bigger picture” should take precedence over idealism. 

The ability to compete in a market dominated by traditional PBMs is really what is at stake. Clients deserve a transparent, pass-through PBM alternative to the PBMs that focus on profit over patients.  

Being members of the GPO allows additional PBMs to compete and ideally, the three PBMs who have created those GPOs would not have 80% of market share.  

Some PBMs are aiming to compete by enhancing their client-focused solution, specifically those with a pass-through model, while working diligently on changing the industry. For example, Navitus is the founding member of CivicaScript and has recently joined Transparency-Rx in an effort to shift the direction of the industry.  

4. Short-term solutions and long-term strategies are key. Ask your PBM for details on both. 

In this complex industry, PBMs are required to find short-term solutions while they develop their longer-term strategies. Both are key to successful pharmacy benefit management.  

For PBMs like EpiphanyRx and Navitus, participating in a GPO provides a short-term solution to increase competitiveness while the long-term strategy remains: build on a twenty-year legacy of true transparency and provide expertise and guidance to others on this topic to influence change. 

Change is always incremental, and it is important to examine the PBM’s journey to get there.  

Look for a PBM who has not wavered in their pursuit of transparency. Are they just starting to change their approach, or have they always offered a transparent model?  

• Examine closely what they really mean by transparency. 
• Follow the bi-partisan efforts to create industry reform. What are these bills focusing on and why?
• Find a PBM who is working to further this reform. 

5. Dialogue about transparency is always good. The more we talk about it, the more awareness we bring to this industry topic.  

Dialogue about transparency is helping to increase awareness of standard PBM practices that provide profit and advantages to PBMs but not their clients and members. We encourage continued dialogue and debate. We encourage evaluation of each PBM’s definition of transparency and the level of integrity they bring with their model.  

Rebates are currently a key component of PBM pricing. All PBMs are striving to be competitive and sometimes this means joining a GPO. At the same time, some PBMs, like EpiphanyRx and Navitus, are working to shift the model towards greater transparency and reduced reliance on rebates as a strategy.   

While it may take time, we are at the forefront of building business practices and new standards built on integrity (not profit). And dialogue, like this one, is influencing much needed industry change.  

For more insights on our pass-through rebate offering and transparency practices, contact Jonathan Har-Even, VP of Sales, at jonathan.har-even@epiphanyrx.com or reach out for a full proposal showing the full value of our PBM solution at rfp@epiphanyrx.com.