How to Grade Your PBM

Pharmacy benefit managers (PBMs) play a pivotal role in the health of your employees, and as an employer, it’s also vital that you understand your pharmacy benefits. Understanding how to grade your pharmacy benefit manager is essential to ensuring your employees have access to the best possible care.

Navigating the Issues Surrounding PBMs

The pharmacy benefit industry continues to become increasingly complex as time goes on. Today’s driver of PBM issues is for-profit companies implementing vertical integration tactics that aid in hiding fees to benefit their stakeholders – instead of their members.

This complexity is being implemented by design, and there is little to no regard for public benefit. Because of high costs, 37% of U.S. adults skip filling their prescriptions, which results in 125,000 preventable deaths each year.

Traditionally, positive contractual terms hide scam practices. The flow of funds all lead to the same for-profit companies and employers, and their members are left to navigate a harsh industry with ever-increasing costs.

Grading Criteria

Not all pharmacy benefit managers are created equal, and having a set of grading criteria to evaluate potential PBM partners is important. Here are some of the key factors to consider when grading your pharmacy benefit manager:

  • Cost: The cost of prescription drugs is a major concern for employers – and employees. Your pharmacy benefit manager should be able to provide prescription drugs at the highest clinical value for the lowest cost.
  • Formulary Management: A formulary lists drugs covered by your insurance plan. Your pharmacy benefit manager should be able to manage this list effectively, making it easy to understand and ensuring your members have access to the medications they need, at the lowest cost available.
  • Clinical Programs: Pharmacy benefit managers should offer clinical programs to help manage members’ health and reduce costs. These programs may include medication therapy management, disease management and wellness programs.
  • Proactive Care Management: Your members should always have access to effective, proactive (versus reactive) customer service. Taking it a step further, evaluate if your PBM is proactively solving problems before they impact your members. 

Look for Transparency

Transparency is crucial to look for when grading your pharmacy benefit manager. Many employers and consumers are concerned about the lack of transparency in pricing and its impact on health care costs. Pharmacy benefit managers negotiate prices with drug manufacturers and pharmacies on behalf of insurance companies and employers. However, the discounts and rebates they receive are not always passed on to employers or members. This lack of transparency can make it difficult for consumers to understand how much they’re really paying for their medications and why prices can vary so widely between different pharmacies.

Some states have passed laws requiring pharmacy benefit managers to disclose more information about their pricing practices to promote transparency. Additionally, a select group of pharmacy benefit managers are taking steps to increase transparency by creating requirements designed to pass on more of their discounts and rebates to employers and, therefore, consumers. By increasing pricing transparency, employers can make more informed health care decisions and save money on prescription medications.

The Great Rebate Debate

Drug rebates are discounts pharmaceutical companies offer to pharmacy benefit managers in exchange for preferential placement of their products on the formulary. Pharmacy benefit managers negotiate with drug manufacturers to obtain discounts and rebates for their clients, which include insurance companies, employers and government programs like Medicare and Medicaid. These negotiations aim to reduce the cost of prescription drugs for employers and their employee members.

However, the use of drug rebates has come under scrutiny in recent years for a number of reasons. First, the rebate system is often opaque and complex, making it difficult for employers and other payers to understand how much they are actually paying for drugs, how much they get back in rebates and how much of their spending is going towards PBM profits. Second, the rebate system can incentivize pharmacy benefit managers to favor drugs with higher rebates over lower-cost alternatives, even if those alternatives are equally effective. This can lead to higher overall costs for employers and members.

Bringing it all together

Grading your PBM performance is important in managing your pharmacy benefits effectively for your employee members. Key factors to consider when grading include cost management, formulary management, network performance and customer service. By evaluating these performance areas, you can gather and analyze the necessary data to make informed decisions about your plan. By taking an active role in managing your pharmacy benefits, you can ensure that your members can access the support they need to stay healthy and manage health care costs effectively.

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