Pharmacy Benefits Uncut

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I’ve written before about the structures built into the employer-sponsored pharmacy benefits space that are designed to keep you and your plan members paying ever-increasing prices for prescription drugs. Things like rebates, lack of biosimilars-first policies, drug formulary decision-making processes, information asymmetry.

But believe it or not, there are steps you can take to significantly reduce (think 20% or more) your prescription drug spend AND improve the health of your plan members. Your number one ally in this pursuit of this goal is detailed, specific information about what’s driving your plan’s spend.

So today I’m sharing five questions you need to ask to begin plugging those leaky holes in your pharmacy benefits plan.

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Question 1: Third Party Revenue Sources

Everyone agrees that the employer-sponsored pharmacy benefits space is riddled with misaligned incentives. The first step to addressing them is to identify them by asking every service provider you deal with to disclose ALL of their revenue sources. Your brokerage or advisory firm may be receiving payments from PBMs, creating a pay-to-play scheme whereby PBMs are effectively buying their way into your RFP process. Your brokerage firm may also be receiving payments from other vendors such as pharmacogenomics testing companies, data analysis providers, point solution providers, to name a few. Not only do you need understand the revenue sources but also the payment structure. Are these one-off payments or are they utilization dependent (e.g. per script or per pharmacogenomics test conducted)?

Needless to say, these payments serve as incentives for brokers and advisors to favourably recommend certain vendors and certain benefits designs that may or may not be serving your interests as an employer. Your imperative is to ensure you’re working with a broker or advisor who’s representing your and your plan members’ interests, not theirs. Knowing where their revenue is coming from gives you a clear picture of who they’re looking out for and gives you the power to say no to any partner that’s not working exclusively on your behalf.

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Question 2: Net Cost Information for Individual Drugs

For many employers, PBM rebates are the holy grail of lowering prescription drug spend. But more and more employers are starting to figure out that rebates don’t actually lower drug prices, but rather increase them. And they don’t just increase drug prices, they also distort your drug formulary and exacerbate health inequities. They’re basically the flywheel of ever-increasing drug prices and the knock-on effects resulting from them.

You can blunt the effect of rebates on your pharmacy benefits plan by asking your PBM for a lowest net drug cost pricing model instead of a rebate-driven model that’s designed to maximize its profits at your and your plan members’ expense. Working with a lowest net cost model will not only lower your drug costs but also provide greater transparency into your drug spend since you’ll know exactly what you’re paying for each drug, affording you more control over your pharmacy benefits dollars. It’ll also help eliminate other detrimental consequences of the high list price/high rebate pricing model such as non-evidence-based drug formulary decisions and increased out-of-pocket costs for patients.

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Question 3: Data Access

The critical ingredient for oversight of your pharmacy benefits plan is data, and not just aggregate data but individual claims-level data. As per the Consolidated Appropriation Act (CAA) you are the owner of your data, not your PBM or any other solution provider. In fact not only are you the owner of your data, as a fiduciary you’re expected to analyze this data to ensure your plan is only paying reasonable prices for necessary expenses.

So, your question for your solution providers shouldn’t be whether you have access to your data but rather how you can access it. Once you’ve got it, be sure to analyze it independently. Service providers who offer to analyze the data they generate for you (e.g. PBMs that generate prescription data) is the classic example of the fox guarding the henhouse. This may sound obvious, but no vendor can provide impartial oversight of its own activity. It’s your duty to keep them honest.

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Question 4: Carve Out of Services

The pharmacy benefits space, particularly the PBM industry, is rife with conflicts of interests that are driving up your drug spend to pad their bottom lines. If you’re like many employers your PBM represents a costly but convenient one-stop-shop for all things pharmacy benefits. It takes care of adjudicating prescription drug claims, it maintains the formulary, it manages specialty drugs, it takes care of prior authorizations, it provides clinical services and maybe more. Allowing one entity to control all aspect of your pharmacy benefits plan is akin to allowing them to act as judge, jury, and executioner all rolled into one.

The best way to break the stranglehold of your PBM is to carve out services wherever possible. Ask your PBM which services can be carved out and work with independent vendors to manage your formulary, review your prior authorizations, oversee specialty drugs, or administer clinical programs. Working with unconflicted partners is one of the best ways to reduce your pharmacy spend and maintain appropriate oversight of your plan.

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Question 5: Formulary Management

I alluded above to how rebates can affect drug formulary decisions, and yes minimizing the impact of rebates on your formulary is an excellent move. But beyond rebates, you want to know how your drug formulary listings are being made. Is your PBM or the vendor that manages your formulary taking an evidence-based approach to formulary-listing decisions? Do they have a Pharmacy and Therapeutics Committee that makes these decisions? Are they using the science of comparative effectiveness to inform their listing decisions? Are they integrating real-world evidence into their decisions? How often are they reviewing their decisions? Are they considering the cost-effectiveness of drugs?

By asking these questions you ensure a systematic process is being followed to making formulary listing decisions, which increases transparency and prioritizes objective evidence over a rebate-driven approach.

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The Bottom Line

Your pharmacy benefits plan isn’t going to fix itself. You need to take control of it and have some honest conversations with your vendors to make sure they’re acting in your best interests. Use these five questions as your starting point.

That’s all for this week.

See you in two weeks,

Nina

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Pharmacy Benefits Uncut is produced by Healthcare Decision Making, a consultancy that helps small and medium sized employers optimize their pharmacy benefits plan. We offer a comprehensive range of services focused on three areas: PBM procurement, ongoing management of your pharmacy benefits plan, and self-policing and oversight of your pharmacy spend. To learn more about how Healthcare Decision Making can help you, email Nina Lathia at nina.lathia@healthcaredecisionmaking.com

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