Pharmacy Benefits Uncut

Read time: 4 min

​Read this newsletter online​

I recently came across a LinkedIN post​ describing how some diabetic patients covered by an employer-sponsored pharmacy benefits plan weren’t testing their blood sugars since they couldn’t afford the $147 per month cost of the testing strips owing to the fact that they hadn’t yet met their plan deductibles. Unsurprisingly, all of them went on to develop insulin-dependent diabetes, a condition that costs far more to treat than $147 per month.

This situation is a classic example of financial toxicity leading to clinical toxicity which ended up costing far more in the long run. And the culprit here was a high-deductible plan (HDHP) forcing members to hit a deductible before the costs of care were covered.

HDHPs are ostensibly designed to decrease monthly premiums, encourage plan members to shop around for the lowest cost treatment options, and avoid unnecessary care.

But the reality is, in many cases, HDHPs are having the opposite effect, forcing plan members to forego necessary care due to costs, leading to worsening of their health status which ultimately costs both them and their employers more in the long run.

This example made me think of other ways employers may be unwittingly working against plan members in an effort to reduce prescription drug costs and realize efficiencies.

Here are three ways you may be unintentionally harming your plan members and what you can do instead.

1. Exacerbating Health Inequities

I’ve written before about how PBM rebates, sold to employers are a means of reducing drug spend, actually increase list prices of drugs. And an underappreciated consequence of ever-increasing PBM rebates is that your sickest plan members bear the greatest burden of these higher list prices. Here’s how it works. Prescription cost-sharing for plan members is based on the list price of a drug, not the after-rebate net price, so higher list prices result in higher out-of-pocket costs. But rebates are paid to the employer after the drug is purchased, not to the individual plan member at the pharmacy counter. They’re then used to lower premiums for all plan members rather than reduce costs for the sickest members. And here's the kicker: your sickest members often require more drugs and higher-cost drugs compared to healthier plan members, effectively funding the PBM rebate scheme. It’s certainly not a stretch to see how some plan members may have to forego necessary medications because they can’t afford them.

But here’s what you can do. Stop playing the rebate game. Wherever possible work with your PBM to obtain the lowest net prices for drugs. Also, consider eliminating out-of-pocket costs for prescription drugs. Yes, it may increase your pharmacy costs, but you’ll most likely reap huge dividends in the long run by preventing deteriorations in plan member health that could ultimately turn out to be much costlier.

2. Limiting Access to Clinical Pharmacy Services

Although you may not know it, suboptimal medication use – incorrect dosages, non-adherence, using the wrong drug, experiencing adverse effects – is likely costing your healthcare plan a huge amount of money. Providing access to clinical pharmacy services such as comprehensive medication management and pharmacogenomics testing would certainly help address this issue but it’s made difficult by the existing structures in the employer-sponsored pharmacy benefits system.

The Big 3 PBMs (Caremark, Optum Rx, Express Scripts), which control over 80% of the employer-sponsored prescription drug market, are all vertically integrated, meaning in addition to being PBMs they also own other parts of the prescription drug-supply chain such as retail pharmacies, specialty pharmacies, and mail-order pharmacies. Because they control other layers of the pharmacy ecosystem, they’re able to steer plan members to pharmacies they own, thereby limiting patient choice and pharmacy access, particularly in rural areas. They may also require patients to use their own mail-order pharmacy for certain specialty medications or maintenance therapies, or force members to pay higher prices if they choose to fill prescriptions at another pharmacy. These limitations on choice may also affect members access to services such as comprehensive medication management where a pharmacist works with individual plan members to develop a customized medication care plan that can be adjusted as required through regular follow-up. Your PBM may also be limiting access to pharmacogenomics testing or financially penalizing you for using this strategy to help determine whether a drug will be effective or safe for a plan member.

Make sure your plan members have access to clinical pharmacy services that will help optimize their medication regimens by carving out these services from your PBM. This way, you’ll be able to work with independent vendors whose incentives align with yours rather than allowing financial conflicts of interests with your PBM to determine which clinical services your plan members have access to.

3. Steering Plan Members to Low-Value Drugs

There’s no doubt the rebate-driven PBM model benefits financially from increased use of high-list price-high rebate drugs in favour of lower cost drugs with lower or no rebates. This leads your PBM to design your formulary so that these higher priced drugs are placed on the most favourable formulary tier increasing the likelihood of them being prescribed instead of lower cost alternatives that are equally effective, thereby increasing its profits at the expense of you and your plan members. This pay-to-play scheme also results in your PBM making non-evidence-based listing decisions, excluding drugs from your formulary, and limiting the availability of generics and biosimilars.

Here again you can address this issue by trying to limit rebates and focus on obtaining the lowest net cost for drugs to enable evidence-based formulary listing decisions. Also demand that your PBM informs you of how they make all formulary listing decisions and the rationale behind them. When they add newer, more expensive drugs to your formulary ask for evidence demonstrating the clinical superiority of these drugs compared to cheaper alternatives. Finally, consider carving out the formulary management function from your PBM and instead work with a vendor that has clinical decision-making expertise.

The Bottom Line

The employer-sponsored pharmacy benefits world is rife with financial conflicts of interest which in many cases could be causing you to unintentionally work against the interests of your plan members. This situation could lead to troubling consequences including financial toxicity, worsening health inequities, and poor health outcomes.

As an employer the first step to making your pharmacy benefits plan member-centric starts with realizing the unintended consequences resulting from many of the structures imbedded in the pharmacy benefits world. Once you’ve recognized them, be sure to put in place a concrete, measurable plan to address each one of them. It’s only through an ongoing, systematic effort that you’ll be able to design a pharmacy benefits plan that works for your plan members, rather than against them.

That's all for today.

See you in two weeks,

Nina

​

If you know someone who would find this newsletter useful please share it. Was this newsletter forwarded to you? Sign up here.

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

​