2024 stands at a critical juncture in the battle against soaring pharmacy costs.
2024 stands at a critical juncture in the battle against soaring pharmacy costs. In 2023, prescription drug costs rose by 8.4%, a 31% increase from the prior year. Stopping this cost escalation requires restructuring the role of pharmacy benefit managers (PBMs) from multiple fronts. On one front, Congress must pass the proposed legislative reforms that can actually curtail opaque PBM practices. Concurrently, employers must demand transparency and accountability from their PBMs. If these dual forces converge, they have the power to bring about a transformative shift that can lower drug spend for millions of American patients.
Congress has introduced key PBM reform.
Currently, there are a plethora of proposals in Congress aimed at dismantling the shady tactics of legacy PBMs. While the individual bills vary, overall they focus on enhancing transparency and reporting, halting profiteering practices like rebate exploitation, spread pricing and clawbacks, and revisiting antitrust concerns.
Transparency and reporting requirements. By enforcing transparency, PBMs would need to release detailed information on prescription drug spending. This includes uncovering drug acquisition costs and rebate data that would help employers understand where their pharmacy benefit dollars are going.
A ban on unethical practices. Another key theme in the proposed legislation revolves around outlawing PBM practices like spread pricing, where traditional PBMs charge plan sponsors more than what pharmacies pay for prescriptions and then pocket the difference. Additionally, there’s a concerted effort to forbid PBMs from retaining any rebates from pharmaceutical companies. However, experts warn that PBMs will be reluctant to give up rebate revenue and may seek alternative profit streams, potentially offsetting any intended savings through higher administrative fees.
Antitrust crackdown. Legislators are calling for a closer look at the vertical consolidation of PBMs with carriers. Concerns around potential antitrust issues are arising from the significant control held by the legacy PBMs and, in turn, the power of their vertically integrated networks.
Passing these reforms would force PBMs to stop some of their most egregious profit practices and necessitate comprehensive data disclosure, arming employers with a more robust understanding of what their PBM is doing and where they’re generating profit.
The PBM revolution must be led by employers.
The congressional process is lengthy, and current legislation may take years to go into effect. In the meantime, employers must continue to recognize that they hold more power than they thought they did when it comes to their pharmacy spending. Innovative employers are pushing back on rising pharmacy costs by:
Demanding transparency from their PBM. Employers recognize that without data, it’s impossible to understand whether their PBM is acting in their best interest. The top categories of information employers are seeking from their PBM are full disclosure of all revenue streams, transparency around the net ingredient cost by drug, and full audit rights of the PBM contract, including rebate agreements. When employers request this data and it’s not provided, it may be time to consider a new PBM partner.
Carving out the PBM benefit. By carving out the PBM benefit, employers can explore partners who are committed to optimizing their pharmacy spend. Considering a carve-out is also an opportunity to re-negotiate your current PBM contract and explore the innovation that has come to market over the last five years.
Sourcing a flexible PBM model. New flexible PBMs allow employers to tailor their plan design to the needs of their specific population, giving them control over how their pharmacy benefit is delivered down to the coverage of a specific drug or class of drugs.
The intersection of demand and reform.
As employers wake up to the games and gimmicks legacy PBMs play, they are in a prime position to be the catalyst for meaningful change. With innovative benefits leaders and legislators working hand in hand, the gross-to-net nonsense disappears, leaving high prescription costs in the past. 2024 can finally be the year when policy shifts and proactive employer preferences align, creating a landscape where PBMs can no longer hide behind opaque practices and a status-quo mentality.
Author: Jason Quillin