How does PBM differential pricing work?

PBMs administer prescription drug benefits on behalf of health insurers, Medicare Part D prescription drug plans, major employers, and other payers. By negotiating with drug manufacturers and pharmacies to reduce drug spending, PBMs have a significant behind-the-scenes effect in deciding total drug costs for insurers, controlling patient access to prescriptions, and dictating how much they compensate pharmacies.

What impact do PBMs have on the cost of prescription drugs?

PBMs work at the center of the prescription drug supply chain. Accordingly, they:

• Create and manage lists or formularies of covered pharmaceuticals on behalf of health insurers, determining what drugs patients use and out-of-pocket payments.

• Use your buying power to negotiate discounts and rebates with pharmaceutical manufacturers

• contract directly with individual pharmacies to compensate beneficiaries for the drugs dispensed.

The federal Centers for Medicare and Medicaid Services found that PBMs' ability to negotiate deeper discounts from manufacturers has helped lower prescription prices and slow growth in drug spending over the past three years. However, PBMs can also incentivize the promotion of expensive pharmaceuticals rather than more profitable ones. Debido a that the reembolsos con frecuencia is determined as a percentage of the price of the list of the manufacturer, the administrators of beneficios de farmacia (PBM) receive a reembolso más significant por los costos farmacéuticos products que aquellos que pueden brindar a valor más excelente a un costo lower. Therefore, those with plans with high deductibles or co-payments based on a drug's list price may have higher charges.

The mere suggestion of pharmaceutical benefits could worry companies. It is unclear why prescription drug costs are rising so rapidly and whether Pharmacy Benefit Managers (PBMs) are managing these costs effectively and delivering the value they should.

Our goal is to help business leaders like you understand the context and better understand what's going on behind the scenes in the pharmacy benefits market. Ultimately, this knowledge can help maximize the value of your health insurance plan for your business and your employees.

Prescription Drug Trends

Americans use drug benefits more often than any other part of health care. According to recent research from Express Scripts, it does.

In 2019, about 19 prescriptions were filled per person, and more than three-quarters of those prescriptions were filled for people with chronic conditions.

We are heading for a perfect storm of expensive new treatments, higher rates of chronic disease, frequent prescription drug use, and rapidly rising brand name drug prices. In 2018, Americans spent $335 billion on prescription drugs; by 2025, this figure is expected to reach $511.1 billion.

The news is terrible for businesses. The rapidly growing financial risk associated with prescription drugs is currently the top healthcare concern for self-funded employers. Imagine a self-insured employer with 1,000 employees; a few unforeseen $1 million drug claims can put them out of business.

Specialty drugs are a significant cost driver for prescription drugs.

Increasingly expensive brand name and specialty drugs contribute significantly to this cost increase. Specialty pharmaceuticals are the category of expensive drugs for rare or persistent diseases. Usually biological in origin, they require professional medical supervision, patient care, and medication management and administration.

Few organizations have the resources or the persistence to develop the professional market knowledge of an experienced PBM. However, it is useful to recognize that there are alternatives to the standard PBM approach. Which can be opaque and full of potentially biased incentives.

Employers should be aware that they can wield considerable influence over the management of their drug benefits, ideally by negotiating unrestricted visibility of all manufacturer revenues and drug pricing based on true costs, plus a reasonable price for services.

What does the PBM price differential involve?

In the differential pricing model. PBMs charge the payer more than the pharmacy reimburses for a specific drug and keep the difference for themselves. How much of this payment goes to pharmacies out of PBM's profits is unknown.

Differential pricing In contrast to the "pass-through model", PBMs charge payers the exact amount they reimburse pharmacies plus a pre-determined administrative fee. The federal government requires Medicaid fee-paying service providers to use the transfer model; however, this requirement does not apply to PBM contracts with Medicaid MCOs or the private sector.

HOW IS PRICE SPREAD APPLIED?

Pharmacy benefit managers negotiate the price of each prescription dispensed by a pharmacy. Based on these contract prices, PBM pays the pharmacy.

Differential marking is used when a Pharmacy Benefit Manager (PBM) uses differential pricing to charge the pharmacy more than they pay, whether the practice discloses it or not. They can use this strategy when they know the plan sponsor won't do anything.

This results in the plan sponsor often paying high fees without your knowledge.

REQUIREMENTS FOR PRESCRIPTION DRUGS AND HEALTH COST

Transparency measures are gaining popularity in the health sector to stimulate competition, reduce expenses and increase accountability. The CAA has standards designed to promote and support these efforts, such as requiring plans and issuers to provide departments with accurate information about prescription drugs and other health care expenses.

This data submission should include information on the most commonly prescribed and most expensive drugs. It also requires the disclosure of information about prescription drug reimbursements provided by drug manufacturers to groups authorized to promote their products. For more information, visit https://www.spectrumpsp.com/.