Pharmacy benefits ripe for transformation?

The Midwest Business Group on Health offers recommendations for employers to work with middleman, particularly pharmacy benefit managers, to reduce drug costs and drive efficiency. (Photo: Shutterstock)

Pharmacy benefits is “one area of the health care value chain ripe for transformation.” At least that’s according to “Drawing a Line in the Sand: Employers Must Rethink Pharmacy Benefit Strategies,” the latest report from Midwest Business Group on Health, a non-profit employer coalition of 130 self-funded public and private employers.

“In theory, a drug should function like any other product in a rational consumer purchasing transaction, but it does not,” the authors write. “Requirements related to the distribution of products, patient safety and clinical efficacy have pushed the industry to develop a complex chain of middlemen that deliver point solutions and are interdependent on one another, resulting in a longer and more complex channel.”

That complexity is compounded by an aging population, a continued rise of chronic disease, and the accelerated commercialization of innovative drugs that carry very expensive price tags, according to the report.

The coalition recommends ways that employers can work with middleman, particularly pharmacy benefit managers, to reduce costs and drive efficiency:

  • Use a transparent/pass through PBM or pharmacy benefit administrator model

  • Offer value-based designs, such as those with no drug formulary

  • Use an independent pharmacy and therapeutics committee to do an inclusive analysis based on formulary, quality and cost

  • Exercise full auditing rights in PBM contracts

  • Require PBM contracts exclude use of copay claw backs at the pharmacy

  • Require that price protection rebates currently collected by the PBM from the manufacturer are disclosed and that employers receive 100 percent of these earned rebates

“For employers as plan sponsors, doing nothing is no longer an option,” the authors write. The coalition offers the following elements its members believe should be included in “a new world” of pharmacy benefits:

  • Drugs are net cost based off list price at the time of dispensing with no rebates or discounts hidden from the purchaser or patient.

  • Drug costs and clinical outcomes are balanced to maximize outcomes for total cost of care savings.

  • Formularies are based on clinical efficacy, not rebates, discounts, exclusive contracts or narrow networks.

  • Dispensing, claims processing and basic required drug utilization review services included in the claims administrative fees.

  • Advanced clinical support and case management program fees are separate from drug dispensing fees.

  • Smart RFP and plan designs address transparency issues and are simplified for minimal customization with a focus on member outcomes and plan performance.

  • Mail order is not mandatory through PBM- owned pharmacies.

  • Real-time claims adjudication is independent from other services.

  • Appropriate alternative drugs are used versus mandatory exclusion lists.

  • Manufacturer contracts are at shared risk for product related outcomes (TBD based on drug category or condition) using meaningful metrics.


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