Drugs, Lies, & Transparency: The Fallacy of PBM "Self-Reform"

An article in Managed Healthcare Executive reported that over the past few years, PBMs have begun expanding from pharmaceutical management to accepting responsibility for managing healthcare’s overall costs. The article explains PBMs are engaging in ‘self-reform’ in four key ways:

Supporting Physicians and Providers at the Point of Care
According to Prime Therapeutics, “PBMs are working with all parts of the supply chain and with payers and providers to make changes quickly and thoughtfully. All parties are aligned in helping drive the best care in a consumer-focused manner at the most affordable price.” 

Our response: If Webster’s Dictionary is seeking examples of doublespeak, this is a ‘prime’ example (so to speak).

PUTT regularly hears from doctors and pharmacists with evidence of the opposite. Patients are denied care, doctors’ orders are overridden by step-therapy requirements - unfulfillable during COVID - and despite executive orders from state governors, PBMs deny medication pre-fills, refills, or refuse to reimburse pharmacies for prescriptions. 

These must be examples of “making changes quickly and thoughtfully” and are probably a driver behind surprisingly healthy PBM revenues during a time when everywhere else is experiencing a pandemic-driven economic downturn. One can only assume the PBM definition of “consumer-focused” equals ‘shareholder dividends’.


Assuming More Responsibility for the Total Cost of Care
PBMs claim they're “assuming responsibility for managing the total cost of care.” They purportedly do this by monitoring medication adherence, utilizing “value-based contracts”, and offering reinsurance on specialty drugs to control spending.

PBMs "monitoring medication adherence" is like cats watching a goldfish bowl - they only do what’s advantageous for themselves and there’s a good chance they’ll try to benefit when no one’s looking. And the PBM description of “value-based contracts” - paying more for medication that works, and less for medication that doesn't - defeats the purpose of lowering costs since the only way to pay less is if a treatment is a flop. 

But let’s focus on reinsurance.

Reinsurance is a secondary form of insurance companies use to hedge their bets on losses. For example, a trucking company might worry about accident losses. Purchasing reinsurance would cover an additional percentage of any accident losses incurred. It’s like using a bigger umbrella in a rainstorm - the user will still get wet, but less so than before.

Reinsurance is expensive, and applying it to specialty medication is a maneuver that could only raise backend costs which would (logically) raise end-payer prices. Unless the PBM plans to take a revenue cut on each specialty drug reinsured, the employer, payer, and patient will end up being charged more to cover the expense. 

Our response: Adding costs will lower drug prices? Even a first-grader understands how that math can’t work.


Providing Increased Cost Control and Transparency in Pharmacy Benefit Design
According to OptumRx, PBMs’ new benefit design allows them to “contract in a performance-driven model" where PBMs are "paid based on the ability to manage the cost and quality of care.” OptumRx claims to do this by “excluding high-cost medications with high rebates and including lower-cost generic alternatives.”

The truth is, PBMs have never disavowed rebates, they’ve simply renamed them ‘manufacturer management fees’. The money is still there - bypassing the intended recipient (the patient) and going elsewhere - usually PBM pockets. Lower-cost generics may be included in plan formularies, but without pharmaceutical companies paying some form of ‘management fees’ those generics will never make it into the hands of consumers under formulary terms.

Performance-driven metrics have been (mis)used by PBMs in pharmacy contracts for years. PBMs twist the language to justify rapidly escalating DIR fees, punitive audits, nickel-and-dime transaction fees, clawbacks, and below-cost reimbursements. To now declare that PBMs themselves will be paid based on “performance metrics” - of their own creation - is not new and is exactly what they’ve promoted themselves as doing for at least the last decade. What WOULD be new is transparency - something that hasn’t yet been tried by any of the “Big 3”.

Our response: Follow the money. Without an independently verifiable, reference-based system for cost management and quality care, PBMs are just a healthcare Ponzi scheme.


Responding to Criticism About PBM Contracting Strategies
After saying that the business model is moving away from rebates, PBMs claim (paragraphs later) that they “pass all rebate dollars back to health plans.” So which is it?

PBMs have claimed to be passing rebates back to 'clients' for years. The problem is the ‘clients’ are the insurance plans - which own or are affiliated with the PBM - so they’re really only passing the money back to themselves. It’s a vertical integration game that creates healthcare monopolies condoned by the FTC - at the expense of the most vulnerable. Employers and government entities who sign PBM contracts may think they're saving money but they're actually being swindled by confusing rhetoric. 

Our response: PBM contracts are written to ensure any ‘savings’ are funneled through the contract terms into the pockets of the PBM/Insurance company. The only benefit reform these companies are engaging in is that which benefits themselves.