Pharmacy Benefit Managers: What Does Your Plan Pay?

Pharmacy Benefit Managers, also known as PBMs, such as Optum, CVS Health, and Express Scripts, cover more than 80% of the pharmacy needs of the American public. Due to their size and control over the pharmaceutical industry, they can negotiate better deals on their behalf with retail pharmacy chains and choose to pay them less. Pharmacy benefit managers can also use their control of the industry to negotiate higher discounts and administrative fees from pharmaceutical manufacturers.

What does this mean for your organization? PBMs typically return some of this money to the plan sponsor, but the rest often remains as profit. The Pharmaceutical Care Management Association (PCMA) said at the 2018 PBM Policy Forum that PBMs will save more than $654 billion in drug spending over the next 10 years. If drug spending is improving, why are drug benefit plan costs rising faster than medical plan costs?

Pharmacy Benefit Managers: Do They Really Save You Money on Your Medications?

Pharmacy benefit managers help organizations save money because they are a less expensive way to get an organization's employees to meet their pharmacy needs. PBMs promote mandatory specialty in their own mail-order facilities and offer deep "incentives" to split their pharmacy offerings. While that sounds positive and reasonable on paper, there's a problem here: no one is holding PBMs accountable.

PBM sets the price they pay to retail pharmacies, specialty pharmacies and their own pharmacies.

In many cases, PBM underpays community pharmacies and may overpay, and there is currently no oversight of these processes. Hopefully that will change soon based on last month's unanimous Supreme Court decision. The hope is that the move will spur greater scrutiny of the PBM industry not just in Arkansas, where the case was centered, but across the United States and possibly by the federal government. These PBM tactics to harm patients by unilaterally paying pharmacists must end, but PBMs must also be challenged on how rebates and savings are returned to plan sponsors.

Most organizations don't have the time or ability to dig deep into your drug claims data to verify how much your pharmacy is being paid, so plan sponsors are often the ones to suffer.

Pharmacy Benefits Consulting Services Example: A Closer Look at Tadalafil

In 2020, SpectrumPS began working with hospice care organizations to help them better understand their own pharmacy spend.

The organization's benefits team has partnered with the same national consulting firm for many years, but the consultant has not regularly reviewed the organization's claims data to verify the amounts paid by their pharmacy versus other pharmacies employees could access to obtain prescriptions.

Unfortunately, our pharmaceutical consulting group has seen this many times before. The solution? To truly understand an organization's pharmaceutical spend, pharmaceutical claims data should be reviewed periodically. Within weeks, Pharmacy Consulting Group was able to uncover a huge gap for the referral organization.

Our team has put together a short case study to help illustrate one of the many games that PBMs play to generate more profit for themselves.

The drug Tadalafil in pharmacies owned by PBM costs more than $3,800. This price is what PBM chooses to pay and collect from the plan sponsor for the cost of the drug. This same drug at non-PBM pharmacies only costs around $200. This illustrates how PBM chooses to pay other pharmacies much less than its own pharmacy. This drug, which was probably only filled for one patient, was an additional $33,000 through PBM's own pharmacy because PBM can set the price of drugs filled in its pharmacy.