As the Federal Trade Commission (FTC) and Congress turn their attention to the business practices of pharmacy benefit managers (PBMs), companies are springing up to provide alternative ways for employers to manage their drug benefits.
Under the traditional model that has been used by the “Big Three” PBMs — CVS/Caremark, ExpressScripts, and OptumRx, which together comprise about 80% of the market — the PBM made its money in several ways, including through rebates — discounts — from drug manufacturers, and “spread pricing,” in which the PBM charges employers and insurers more for the drug than it pays to the pharmacy. PBMs have also used other tactics, such as charging fees to pharmacies known as “clawbacks,” to increase revenue.
A Different Model
But these alternative PBMs operate in a different way — they charge a flat per-member-per-month fee to employers and then pass along 100% of rebates to them, which they contend is a better deal for their employer customers. “We are markedly different than the Big Three model,” Jordan Feldman, CEO of Rightway Health, one of the alternative PBMs, said during a phone interview at which a public relations person was present. “We don’t retain rebates, don’t utilize spread pricing, and don’t own mail order or specialty facilities. We simply charge a per-member, per-month administration fee such that we can take care of the member and not be financially misaligned with our underlying client.”
Under this model, the relationship with pharmacies is different, according to Feldman. “Rightway has 68,000 retail pharmacies in our network; we have no financial relationship with the pharmacies other than facilitating prescription drugs. We don’t make any money off of those relationships.”
However, things are now changing with the Big Three, according to Clay Keene, principal at Avalere, a healthcare consulting firm. For example, spread pricing “has been gone for a while now,” he said during a phone interview at which a public relations person was present. “Employer groups and health plans became wise to that.”
In addition, “there has been a later shift in the last couple of years where employers have gotten wise” to the PBMs not always passing on the entire rebate, “and they said, ‘No, we want 100% of the rebates that you collect,” said Keene. To combat this, the Big Three have created third-party organizations such as CVS’s Zinc Health, in which the third party “is collecting rebates on their behalf,” making the transaction more opaque to the employer.
Good for the Industry?
Are these alternative PBM models good for the industry? Yes, said Marsha Simon, PhD, an independent drug industry analyst. “We clearly need alternative companies that are not conflicted by joint ownership with large insurers and pharmacies,” she wrote in an email to MedPage Today. “Until these businesses are independent from one another and the prices they negotiate are transparent to patients, efforts by Congress to, for example, de-link fees for the PBM services from the prices they negotiate will not succeed in the long run because the players will find new ways to subvert the new rules.”
“In the short run, Congress should apply the pending transparency rules for PBMs to other middlemen, including especially the third-party administrators (TPAs) who are the same large insurers who administer health benefits for … self-insured employer and union plans,” said Simon. “These TPAs are typically either the owners of the big three PBMs or subcontract with them.”
Madelaine Feldman, MD (no relation to Jordan Feldman), vice president for advocacy and government affairs at the Coalition of State Rheumatology Organizations, agreed that having an alternative to the Big Three was a good idea. “Any kind of transparency is better than what the Big Three have, because it’s truly a whack-a-mole — as soon as employers are told about one thing, the money gets shifted somewhere else,” she said in a phone interview. “All three PBMs have profit centers that employers have no idea about. I would hope that the alternative PBMs don’t play that game.”
However, she added, “there still can be a lot of things that could lead to an employer’s breach of fiduciary duty if the PBM doesn’t know their stuff in terms of looking at the pricing of drugs and defining the price of drugs properly.” She noted that employees of the financial services firm Wells Fargo recently sued the company over what employees alleged was poor handling of prescription drug costs.
More Regulation Being Considered
PBMs have also received much attention on Capitol Hill recently. The FTC issued a report finding that PBMs often overpay the pharmacies that their parent company owns compared with independent or other pharmacies, and the agency is considering suing the PBMs over their practices. Meanwhile, Congress is mulling legislation to more tightly regulate PBMs.
For example, the Pharmacy Benefit Manager Reform Act would require PBMs to report annually to the health plans they work for on particular elements, including the amount of prescription drug copayment assistance funded by drug manufacturers, a list of covered drugs billed under the plan during the reporting period, and the total net spending by the health plan on prescription drugs. The bill also bans spread pricing and requires PBMs to give to the plan sponsor all rebates, fees, alternative discounts, and other remuneration received from a drug manufacturer.
Such measures may not be enough, said Madelaine Feldman. “I’m not certain the powers that be in Congress have it in them to give us true transparency,” she said. “Already, 3 years ago, [the PBMs] started hiding their money offshore because they knew this was happening, that transparency was coming for them. They started reclassifying rebates as fees … fees that were never sent back to clients, but were kept by PBMs … I’m not sure transparency will make it all the way to what needs to be seen: the contract between the manufacturer and the PBM.”
However, Keene didn’t think more regulation was necessarily the answer. “From my perspective, PBMs are pretty highly regulated,” he said. Although it might be true that PBMs’ business practices around rebates deserve a closer look, “PBMs are not government-funded; they are a for-profit business. They do need to make a profit, and they should make a profit … [The question] is what is a fair profit, and at what cost to the consumer?”
The Pharmaceutical Care Management Association, a trade group for PBMs, did not respond by press time to a request for comment for this story.
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Source link : https://www.medpagetoday.com/practicemanagement/reimbursement/111414
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Publish date : 2024-08-07 21:32:38
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