Brittany Hoffman-Eubanks

Pharmacy benefit managers (PBMs) have successfully leveraged their “middle-man” status to maximize profits while simultaneously harming American pharmacies and increasing costs to patients. As discussed in 

 the unethical PBM tactics lead to undercompensation for pharmacies (

), and increased drug prices, limited formularies, and restricted pharmacy access for patients. This article will offer potential PBM solutions and highlight advocacy measures to address these pharmacy concerns.

To obtain better cost control, employer plan sponsors, and federal/state government need to demand complete transparency from PBMs for all health plans.

 Complete transparency would include all indirect and direct revenue streams that PBMs acquire as a result of administering prescription benefit plans. PBMs have been fined over the years for a variety of infractions but often they are related to rebates from drug manufacturers. For example, Advance PCS (now part of CVS/Caremark), paid $137.5 million in damages for rebate issues in 2005. 

 Similarly, Express Scripts was ordered to pay $9.5 million in 2008 for drug-switching and illegally retaining rebates, spread profits, and discounts in federally-funded health plans.

 It is likely that as a result of these issues, PBM transparency rules were enacted as part of the Patient Protection and Affordable Care Act (PPACA). These new rules, however, only apply to federal and state marketplace and Medicare Part D health plans. In 2016, the Centers for Medicare and Medicaid Services mandated Part D plans and their PBMs must provide all contracted pharmacies the reimbursement rates for drugs under maximum allowable cost (MAC) pricing system standards.

As an alternative to traditional PBMs, some plan sponsors have terminated the use of PBMs for their plan benefit administration. In 2016, 20 large employers (ex. Coca-Cola and Marriott) formed the Health Transformation Alliance (HTA) to eliminate the use of wasteful and expensive PBMs.

 Today, HTA includes more than 40 major corporations, covers more than 6 million lives, and has an annual spend of $25 billion.

Many businesses, however, may not have the means to form these PBM alternative organizations but can seek out other resources such as transparent PBMs and pharmacy benefit administrators (PBAs). Transparent PBMs in contrast to their traditional counterparts do not profit from rebates, spreads, or other secret incentives.

 Alternatively, transparent PBMs charge a flat administrative fee for each prescription. For example, in the first year after Meridian switched to a transparent PBM their drug spend decreased by $2 million.

 Another option for plan sponsors is the use of a PBA to administer prescription drug benefits. PBAs handle administrative services for the plan sponsor (ex. claims processing) and the plan sponsor controls traditional PBM tasks (ex. formulary management, rebate negotiation, pharmacy contracts).

Advocacy has also been utilized in recent years to address the PBM concerns by pharmacies and plan sponsors. In 2017, multiple pieces of legislation were introduced at the state and federal level to advocate for increased transparency and regulation of PBMs. For instance, in February of 2017, Representative Morgan Griffith (R-VA), introduced H.R.1038-Improving Transparency and Accuracy in Medicare Part D Spending Act to amend the Social Security Act to prohibit Medicare prescription drug plan sponsors from retroactively reducing payment on clean claims submitted by pharmacies.

Similarly, the equivalent senate bill S.413 was also introduced in February 2017 by Senator Shelley Moore Capito (R-WV). Another important piece of legislation introduced in March 2017 is H.R. 1316 -Prescription Drug Price Transparency Act by Representative Doug Collins (R-GA). The purpose of H.R.1316 is to bring clarity to maximum allowable cost (MAC) pricing and, as of April 2017, was referred to committee.  Finally to address pharmacy access concerns, H.R. 1939/ and S. 1044—Ensuring Seniors Access to Local Pharmacies Act of 2017 were introduced in April/May of 2017 by Representative Morgan Griffith (R-VA) and Senator Shelley Capito (R-WV), respectively. The purpose of these bills is to give seniors more access to discounted copays for prescription drugs at their pharmacy of choice and increase competition among Part D drug plans ultimately leading to cost savings for the government and tax payers. Progress has been slow, but it is absolutely crucial for pharmacies across the country to stay financially viable and continue providing care to their patients.

In conclusion, there have been multiple concerns levied about PBM tactics that have led plan sponsors and pharmacy stakeholders to push back. To address the conflicts of interest, unethical business practices, and wasteful practices of PBMs, plan sponsors have begun utilizing transparent PBMs and PBAs to help decrease their prescription drug benefit spend. What’s more, pharmacy stakeholders have introduced legislation with the goal of increasing transparency, providing oversight for PBM revenue streams, and proper reimbursement for drug products dispensed. While drug benefit services are necessary to distribute care to enrollees of plan sponsors it should not be at the expense of patients, plan sponsors, and pharmacies. New innovative care models and alternative administration services can be implemented to provide patient-centered care that is affordable, outcome based, and reasonable for all stakeholders.

Brittany Hoffmann-Eubanks, PharmD, MBA is cochair of Public Relations for the Illinois Pharmacists Association. 

1. National Community Pharmacists Association. The PBM Story. [Internet] Accessed 17 December 2017. Available from: 

http://www.ncpanet.org/advocacy/pbm-storybook

2. Barlas S. Employers and drugstores press for PBM transparency. P&T. 2015 Mar; 40(3): 206-208

3. National Community Pharmacists Association. Alternatives to Traditional PBMs. [Internet] Accessed 17 December 2017. Available from: 

http://www.ncpanet.org/advocacy/pbm-resources/alternatives-to-traditional-pbms

4. Health Transformation Alliance. [Internet] Accessed 17 December 2017. Available from: 

5. Eban, K. “Painful prescription: pharmacy benefit managers make out better than their customers” Fortune Magazine. [Internet] Accessed 17 December 2017. Available from: 

http://katherineeban.com/2013/10/23/painful-prescription-fortune-com/

6. Congress.gov. H.R.1038 — Improving Transparency and Accuracy in Medicare Part D Spending Act. [Internet] Accessed 17 December 2017. Available from: 

https://www.congress.gov/bill/115th-congress/house-bill/1038

7. Congress.gov. S.413 — Improving Transparency and Accuracy in Medicare Part D Spending Act. [Internet] Accessed 17 December 2017. Available from: 

https://www.congress.gov/bill/115th-congress/senate-bill/413

8. Congress.gov. H.R 1316 — Prescription Drug Price Transparency Act. [Internet] Accessed 17 December 2017. Available from: 

https://www.congress.gov/bill/115th-congress/house-bill/1316

9. Congress.gov. H.R 1939 — Ensuring Seniors Access to Local Pharmacies Act of 2017. [Internet] Accessed 17 December 2017. Available from: 

https://www.congress.gov/bill/115th-congress/house-bill/1939

10. Congress.gov. S.1044 — Ensuring Seniors Access to Local Pharmacies Act of 2017. [Internet] Accessed 17 December 2017. Available from:  

https://www.congress.gov/bill/115th-congress/senate-bill/1044

Articles

There have been multiple concerns levied about PBM tactics that have led plan sponsors and pharmacy stakeholders to push back.

The Role of Pharmacy Benefit Mangers in American Health Care: Pharmacy Concerns and Perspectives: Part 3

Rising health care expenditures within the United States has been a major focus of policy makers, business owners, and individuals for years.

According to the Centers for Disease Control and Prevention (CDC), the per capita national health expenditures in 2015 US dollars was $9,990, total national health expenditures were $3.2 trillion, and the percent of Gross Domestic Product (GDP) was 17.8% 

 Furthermore, prescription drug treatment accounted for 10% of the overall costs associated with national health expenditures in the US (2015 US $).

A 2013 report by Moses III et al, identified the top 4 drivers of health care costs in the US since 2000 as: 1) administrative costs (5.6% per year); 2) price of health care services (4.2% per year); 3) price of drugs and medical devices (4% per year), and 4) price of professional services (3.6% per year)

 Interestingly, this report did not find demand for health care services or aging of the population to significantly contribute to this increase in health care costs. Thus, the price of health care itself seems to be driving the increase in costs. 

To address these increases in costs related to prescription drugs, private employer groups, individual States, and the federal government, have utilized the services of pharmacy benefit managers (PBMs). Historically, PBMs were “middlemen” entities designed to process prescription medication claims (for a small fee per claim) for insurance companies and plan sponsors (ex. private employers). 

Today, PBMs have leveraged their position as the “middlemen” and now impact almost every aspect of the prescription drug marketplace.

 For example, the top 3 PBMs within the country manage the drug benefits for approximately 95% of the US population or 253 million American lives.

 Beyond their traditional claims processing, PBMs are now involved in drug utilization review, drug plan formulary development, determining which pharmacies are included in the prescription drug plan’s network, deciding how much network pharmacies will be reimbursed for their services, and operating mail order and specialty pharmacies themselves.

y states: “over the past decade, the role of PBMs in the delivery of health care has increased, due to a confluence of factors: coverage expansions under both the Medicare Part D prescription drug benefit and the Affordable Care Act, combined with an increase in prescription drug spending that has motivated commercial health plans and self-insured employers to outsource the management of their spending on outpatient prescription drugs.”

 As a result of this increased involvement, PBMs today have multiple, extremely profitable, revenue streams with the top 3 PBMs each exceeding 15 billion in revenue yearly.

PBMs are compensated in 3 main ways: 1) rebates; 2) administrative fees; and 3) pharmacy spread.

A rebate is a discount on a mediation a drug manufacturer provides to the PBM in return for the PBM covering the manufacturer’s drug product. Since PBMs make the formularies that the plan sponsor will cover they can negotiate better prices for certain drugs (often name brand) when there are other less expensive equivalent medications that could be utilized. This process is concerning since, typically only a portion of those rebates are shared back with the plan sponsor while the PBM pockets the rest creating a major conflict of interest.

It is estimated that approximately one-third of the net price paid for prescription drugs is traceable to these rebates and, as a result, consumers may already be paying one-third more from rebates alone.

 In addition, patients are often forced to switch their drug therapy based upon these rebates that dictate the plan’s formulary regardless of their efficacy. If patients or their providers want the patient to stay on the original drug therapy, then they are forced to obtain a prior authorization before the PBM will authorize coverage for the drug product. This practice is alarming since a patient’s drug therapy may be interrupted as a result and can lead to patient harm.  For example, the novel factor-Xa direct oral anticoagulants (apixaban, rivaroxaban, and edoxaban) are not necessarily interchangeable and evidenced based guidelines, pharmacologic properties, renal/hepatic impairment, adherence, and patient preference should be taken into account when deciding which agent is appropriate. Furthermore, these agents have very short durations of action and even missing one dose as a result of a prior authorization request can put a patient at risk of a negative outcome.

Data from 151 Fellows of the American College of Cardiology (FACC) surveyed by the American College of Cardiology (ACC) revealed that 71% thought formulary restrictions lead to disparities in care related to income, elderly age, and underserved populations.

Administration fees are another source of revenue for PBMs where they often charge plan sponsors and manufacturers additional fees and payments that the PBM pockets. Due to the lack of transparency and the highly complicated nature of drug pricing, it is incredibly difficult for plan sponsors to identify all charges outlined in their contracts with the PBMs.

The third, and arguably, most controversial source of revenue of the PBMs comes from the “pharmacy spread.”The pharmacy spread is a PBM practice where the network pharmacy is reimbursed one price and the plan sponsor is charged a higher price for the same drug product and the PBM pockets the difference (otherwise known as a “clawback”).

  PBMs are able to do this because they negotiate separate contracts with the network pharmacy and the plan sponsor with neither typically being privy to the other’s contract. Furthermore, the contracts created with the network pharmacies frequently forbid the pharmacy from informing the patient of this price difference who might otherwise choose to pay out-of-pocket if the cost was lower than their plan.

 Thus, this practice leads to increased costs for the plan sponsor and the patient while the PBM increases their profit. In fact, PBMs are estimated to profit by hundreds of millions of dollars annually from clawbacks and this has led to at least 16 lawsuits over the past year to address this conflict of interest.

As a result of these revenue sources, PBMs are making billions of dollars a year with little to no federal regulation or oversight.

 The lack of transparency and regulation is alarming given they manage numerous prescription plans that are funded by American tax dollars with the intended goal of reducing costs. Meanwhile, health care costs continue to rise within the US and drug costs are an important component of total aggregate costs. In part 2 of this article series, the specific impact of PBMs on American pharmacies will be discussed in detail.

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https://www.cdc.gov/nchs/fastats/health-expenditures.htm

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National Community Pharmacists Association. Pharmacy benefit managers (PBMs) 101. [Internet] Accessed October 10, 2017. Accessed at: 

http://www.ncpa.co/pdf/leg/nov12/pbm_one_pager.pdf

National Community Pharmacists Association. PBMs. [Internet] Accessed October 10, 2017. Available from: 

http://www.ncpanet.org/advocacy/pbm-resources/what-is-a-pbm-

Concerns regarding the pharmacy benefit management industry. [Internet] November 2016.

. Accessed October 10, 2017. Available from: 

http://www.ncpa.co/pdf/applied-policy-issue-brief.pdf

National Community Pharmacists Association. The PBM Story. [Internet] Accessed October 10, 2017. Available from: 

Rising health care expenditures within the United States has been a major focus of policy makers, business owners, and individuals for years.
 