By Jim Jorgenson, Dan Valvassori & Phil Brummond
With prescription drug prices continuing to rise for 2023, driven in large part by specialty pharmaceuticals, PBMs will continue to be in the spotlight for their role in high prescription drug costs and a lack of transparency around their revenue streams. And, while we can expect continued government activity at the federal, state, and local levels around PBM business practices, federal action may be more limited due to Republican control of the House of Representatives.
For 2023, the evolution of fully transparent PBM models will continue to be an industry disrupter. The majority of PBMs, including the “big three,” use a traditional lock-in mode which often includes hidden revenue streams for the PBM that can add costs for plan sponsors. While these traditional PBM models do provide discounts for volume and high rebates, they also can typically contain spread-related compensation from pharmaceutical manufacturer revenue on rebates, discounts and incentives. Traditionally, it has been difficult to compare the two models, and many organizations rely heavily on the rebates with the traditional model. However, as transparent PBM models generate more experience and outcomes, more plan sponsors are moving away from the rebate-driven approach. This is because the transparent pass-through pricing models provide greater transparency into the PBMs’ financial and operational processes, where 100% of rebates and discounts received are passed back to the plan sponsor. Spread is not utilized throughout the pharmacy dispensing channel, so plan sponsors are billed the same amount the pharmacy is paid. This approach, along with clinically appropriate medication utilization, makes prescriptions more affordable by taking the unnecessary costs out of pharmacy benefits, resulting in an overall lower net-cost, and will continue to gain traction in 2023.
Also for 2023, we expect to see an increased PBM focus on the management of specialty drugs which now comprises over 50% of the total prescription drug spend but less than 5% of total prescription volume. With specialty drugs driving costs, this is a very important focus. For example, the new gene therapy for hemophilia B is estimated to cost $3.5 million per infusion. However, this comes with a warning, as some of the tactics that may be employed can have a negative impact on pharmacy operations and patient access. Case in point, recently, in September of 2022, over fifteen thousand pharmacies received a communication informing them that, because they elected to not re-contract with one of the America’s largest health plans, their relationship was terminated. Unfortunately these pharmacies were never even sent anything to elect. What followed was a barrage of confusion, finger pointing, government involvement and, eventually, backtracking. Meanwhile, communications sent to the plan went largely unresponsive as pharmacies quickly saw one of their largest payers walk out the door. These types of negotiation tactics may be employed more frequently in the future against pharmacies that dispense specialty medications. With the increasing amount of health systems dispensing these specialty prescriptions, they make for easy targets. Health system pharmacies should be vigilant and prepared to deal with attempts to “narrow the network” like this.
First and foremost, be sure to keep track of all communications from your PBM networks and PSAO providers. Keeping tabs on communications can prove to be a daunting task, but keeping good organization of this documentation can help provide a lot of clarity when disputes like this arise. If it happened to your pharmacy, it likely also happened to another pharmacy you know. Align with a local, regional, or national pharmacy association to gain strength in numbers and get your message out there. In the example above, the health plan eventually conceded and sent out election options to terminated pharmacies – but only after it became national news. While there may not always be avenues to reconcile the problem independently, you need to know that your voice matters.
Finally, we expect Fraud, Waste, and Abuse (FWA) prevention activity to continue to increase in 2023 driven in large part by plan sponsor concerns. PBMs will be placing a growing emphasis on helping plan sponsors protect their assets by more aggressively working to prevent FWA (fraud being the use of false information to gain payment for a drug; waste being overutilization of services generating unnecessary costs; and abuse being activity that results in unnecessary payment for drugs). With the pandemic creating a variety of new remote practice opportunities, while this improved patient access to care, it also increased opportunities for drug related FWA.
Visante has long standing experience in supporting self-insured employers like hospitals and health systems and other plan sponsors to create the best PBM strategy for their organization and to prevent FWA and we continue to advocate for the active participation of pharmacy in organizational decision making around PBM services.
As experts in pharmacy, we know how to connect your internal clinical resources to optimize care and lower total cost. As a firm that is independent from any PBM, drug wholesaler, drug chain or manufacturer, our sole focus is what’s best for you and your employees.