Pharmacy Benefit Managers (PBMs) play an important role in impacting drug pricing. For example, many aren’t aware that PBMs charge an administrative fee as a percent of the drug price they negotiate for. Therefore, often times they are incentivized to provide drug rebates on drugs with a higher cost. Does this seem counterintuitive? Well, that’s because it is. That’s why the US government has been discussing PBM reforms for several years now. These reforms are aimed at addressing the high cost of prescription drugs and the increasing use of prior authorization.
Prior authorization is a process that requires patients to get permission from their insurer before they can fill a prescription. This process can be time-consuming and frustrating for patients, and it can also lead to delays in treatment.
The US government is considering a number of reforms to PBMs. These reforms include:
- Requiring PBMs to disclose more information about their practices.
- Limiting the use of prior authorization.
- Increasing competition among PBMs.
While PBMs played an important role mitigating the cost of drugs 30 or 40 years ago, that model is not as applicable today. The service PBMs perform for pharma companies is preferred drug placement on their formulary. Pharma companies give them a rebate but they also make other payments. For example, formulary payments, market payment, and bonus payments.
Currently, in the United States there are three major PBMs that control over 85% of the market. They are CVS Caremark, Express Scripts/Cigna and Optum Rx.
Based on the latest data, 73% of prescription spend is on specialty pharmacy products. Therefore, these reforms could have a significant impact on prior authorization which has higher denial rates on specialty products, such as biologics.
If PBMs are required to disclose more information, patients will be better able to understand why they are being asked to get prior authorization. This could lead to fewer delays in treatment. But this would mean better understanding how PBMs collect their fees. PBMs make money by (1) spread pricing where the health plan is billed more than the pharmacy is reimbursed (2) reimburse retention, where they collect rebates from drug companies (3) collecting administrative fees and (4) owning their own mail order specialty pharmacy.
If the use of prior authorization is limited, patients will be able to get their prescriptions filled more quickly. This could improve access to care and reduce costs. Additionally, as it stands, many professionals involved in processing prior authorizations simply don’t have the training needed to minimize denials where insurance companies are constantly changing their rules. This is why prior authorization and managed care specialists are considering becoming certified as prior authorization specialists. Currently, the only accredited and recognized program is the Prior Authorization Certified Specialist (PACS) program offered by the Accreditation Council for Medical Affairs (ACMA).
If competition among PBMs is increased, PBMs will be more likely to offer lower prices and better service. This could also lead to lower costs for patients.
The US government is still considering these reforms, and it is not clear when they will be implemented. However, these reforms have the potential to make a real difference in the cost and availability of prescription drugs.
Here are some of the potential benefits of PBM reforms:
- Lower prescription drug costs.
- Increased access to care.
- Reduced delays in treatment.
- Improved transparency in PBM practices.
- Increased competition among PBMs.
PBM reforms have the potential to make a significant positive impact on the US healthcare system. They could help to lower prescription drug costs, improve access to care, and reduce delays in treatment.