October 31, 2024
Just in time for the season of ghosts, ghouls and things that go bump in the night… here are 7 spooky things about pharmacy benefits.
1. Cursed Contract Language
Pharmacy benefit manager (PBM) contracts can be complex and include language that inadvertently impacts or overrides other terms and guarantees within the agreement. Often PBM contracts do not include terms and conditions that can be easily defined, leading to a situation where plan sponsors cannot hold them accountable for performance or promises.
2. Chilling Cost Drivers
In recent years, high-cost specialty medication approvals for common and rare diseases have increased. Specialty medications may only be used by 1-2% of a plan’s members, but they typically account for 50% of the plan spend. While these can top hundreds of thousands of dollars a year, Gene and Cell Therapies have reached a new high of $4.25 million per treatment for the therapy component alone.
3. Nightmarish Vertical Integration
Almost 80% of all prescription claims filled in the U.S. are adjudicated by just three PBMs with investment in other areas of benefits management and services. These services include medical carriers, pharmacies, suppliers, manufacturers and rebate aggregators/group purchasing organizations. Significant opportunity for control, influence and misaligned incentives exists when these companies are essentially doing business with themselves.
4. Frightening Formularies
Drug formularies may include coverage of medications that are expensive and do not provide additional clinical value over cheaper alternatives. Formularies also may be developed with a focus on profits for PBMs which may increase cost for plan sponsors.
5. Phantom Transparency
From rebates to spread pricing and drug acquisition rates, there is a lack of visibility to the true pricing and cost associated with many PBM business practices. This can make it not only difficult to get a fair deal on your pharmacy benefits, but also a challenge to know if you have one.
6. Ravenous Rebate Plays
For brand name drugs, systems have been developed between manufacturers and PBMs, where rebates are tied to formulary placements and have become expected in the U.S. supply chain. This has the potential to drive up costs at the counter for members and plan sponsors. If PBMs do not pass through 100% of rebates and other funds, this becomes another source of profit for PBMs, while also driving up costs overall.
7. Twisted Profit Opportunities
While PBMs get a great deal of the spotlight when it comes to concerns over the rising cost of medications, profit is captured by a multitude of players. Manufacturers, insurers, retail pharmacies, wholesalers and rebate aggregators/group purchasing organizations all capture profits in the drug price supply chain.
What about pharmacy benefits gives you goosebumps? Contact Innovative Rx Strategies to help steer clear of these and other frightening pharmacy benefits pitfalls.
