Employer Perspectives on PBMs

By November 27, 2017Commentary

Given the role of drug costs in overall health spending, it is understandable that employers are focused on how to management that category effectively.  Most employers rely on a pharmacy benefit manager, either directly or through a health plan vendor, to perform that task.  But according to a new survey from the National Pharmaceutical Council, companies aren’t very satisfied with their PBM relationships.   (NPC Survey)   The survey covered 88 very large employers and some interviews with experts.  The top expectations from employers were negotiating with drug companies to reduce costs, listed by 80%, assuring use of cost-effective treatments, also listed by 80%, maintaining a network of convenient pharmacies, 75%, and be a source of innovative ideas to improve the drug benefits, 70%.  In regard to specialty drugs, which are the primary driver of drug spending trends, similar large majorities had high expectations on cost control, and 79% wanted input and recommendations to help with the pharmacy benefits strategy and 71% wanted help in improving medication adherence.

Pharmacy benefit and specialty drug benefit managers are not held in high regard by most employers.  Only 33% of respondents said PBMs were strongly aligned with the employers’ objectives and only 30% said so in regard to specialty PBMs; 35% said PBMs and 33% said specialty PBMs were trustworthy, and 37% said they were very satisfied with their PBM and 35% with their specialty PBM.  In contract, for example, 66% said their benefit consultant was aligned with their needs, 69% said the consultant was trustworthy and 62% were very satisfied with the consultant.  Looking further at sources of unhappiness, only 41% gave very good performance marks to their PBM in regard to price negotiations with drug companies and only 24% in regard to assuring use of most cost-effective treatments.  63% said PBMs lack transparency in how they make money and 69% would prefer an alternative to rebates.  It is clear that employers have a perception that PBMs lack of transparency relates to pricing arrangements that benefit the PBMs at the expense of employers and members.  And most employers, even these large ones, expressed concern about their ability to effectively understand their PBM contract and the PBM’s arrangement with drug companies and pharmacies.  Hence, they tend to rely on consultants.

Preferred scenarios identified by employers include replacing rebates with discounts and pay PBMs solely on the basis of adminstrative fees or even to work directly with drug companies and pharmacies in regard to medication benefits.  Seems like an opportunity for some PBM to offer that and a challenge to the PBM industry that has in fact relied on hidden arrangements to bolster profitability.  Now interestingly, the National Pharmaceutical Council is supported by the drug companies.  Not exactly friends of the PBMs and certainly not a group looking to lower drug spending.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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