Employers and PBMs: Where do They Stand on Prescription Drug Issues?

Employers provide coverage for 56% of the insured population, which carries significant weight with pharmacy benefit managers.

The role of pharmacy benefit managers (PBMs) in healthcare is to manage prescription drug access and spend for employers and some health plans. Recently, PBMs have been scrutinized because of claims that their practices and lack of transparency may actually be increasing drug costs; however, PBMs counter that they save money for patients and the healthcare industry.

A new study commissioned by the National Pharmaceutical Council (NPC) and conducted by Benfield suggests there may be a significant disconnect between employers and PBMs in what is expected and the value of the services PBMs provide.

The authors highlight that this disconnect is largely based on employer concerns regarding transparency, contract complexity, rebates, and value, according to the study.

“Employers want to provide the best health benefits for their employees while getting strong value in return for the money they spend on prescription drug benefits,” said Dan Leonard, NPC president. “We wanted to understand employers’ perspectives on PBMs and benefit design with the intention of beginning a constructive and educational conversation among health care stakeholders.”

Current estimates suggest that employers provide coverage for 56% of the insured population, which gives them significant market pull with PBMs. Choices employers make related to benefits, vendors, and contracts affect a large portion of Americans.

A majority of employers surveyed or interviewed showed concern regarding how they interact with and use their PBMs, according to the study.

The authors found that a vast majority of employers feel their PBM lacks transparency, with 63% reporting that PBMs are not upfront about profits. Additionally, 30% of employers said they fully understood their contracts, while only 40% of employers indicated that they understand performance benchmarks.

Another worry of employers was the complexity of their contracts with PBMs. Approximately 58% said contracts are too complicated, worded ambiguously, and may benefit the PBM at the employer’s expense, according to the study.

The authors found that a majority of employers would like PBMs to simplify their contracts to increase transparency.

Notably, 69% of employers were interested in alternative rebates, including discounts or point-of-sale rebates.

Employers also expressed interest in understanding how PBMs make formulary and exclusion decisions based on clinical, financial, and economic factors. Currently, 50% of employers think that PBMs are not transparent in these decisions, according to the study.

Respondents suggested that employers can adopt a value-based design or outcomes-based drug pricing rather than current formularies, according to the study.

These findings suggest that employers and PBMs deviate on several key issues with prescription drug management and highlight areas for improvement.

“The survey indicates that there is room for improvement in the dialogue between employers and PBMs. And what is interesting—though perhaps not surprising—is that our analysis indicates employers that are more actively engaged in managing their prescription benefits tend to be more trusting of and satisfied with their PBM vendors,” said Chuck Reynolds, area president, Benfield. “We speculate this is because more engaged employers value prescription benefits more highly, communicate their expectations more clearly, and work more diligently with their PBM vendors to get rid of ambiguous contract language and assure alignment between PBM services and total value.”