For health insurance companies, Part D drug plans, major employers, and other payers, pharmacy benefit managers or PBMs, handle prescription medication benefits. PBMs have a substantial behind-the-scenes influence on establishing total drug prices for insurers, controlling patients' access to prescriptions, and dictating how much pharmacists are paid through negotiation with drugs companies and pharmacies to manage drug spending. 1 Regarding their contribution to rising costs of prescription drugs and spending, PBMs have come under increasing scrutiny.
What Does A Pharmaceutical Benefit Manager Actually Do?
PBMs' primary goals are to curate the available pharmacy benefit plans and to make necessary pharmaceuticals more accessible and affordable for patients (also known as "plan participants").
- Goal 1: Lower Spending
With a wide network of mail-order or retail pharmacies, PBMs bargain prices. PBMs can also purchase medications at a lower cost from manufacturers thanks to their size and consequent power. As a result, they may provide patients and employers with more convenient access to drugs at comparable prices across various retail chains.
Goal 2: Expanding Access to Medicine
By directly interacting with drug producers or wholesalers, pharmacy benefits managers improve a patient's access to pharmaceuticals. PBMs bargain for bulk reductions from Wholesale Acquisition Cost (WAC) that they can then pass along to their customers. As a result, patients can obtain coverage for a necessary medication at a lesser cost to the policy and the member.
A pharmacy benefit manager can frequently advise businesses by offering suggestions on various pharmaceutical plan designs, clinical initiatives, and other topics. It's reasonable to compare the interaction between the PBM, the drug maker, and the employer to a game of tug-of-war. With the aim of obtaining a fair agreement for both sides and providing ways to reduce prescription benefit expenses, the pharmacy benefits manager serves as a go-between, connecting to both the producer and the employer.
Pharmacy Benefit Administrators' Function in the Supply Chain of Pharmaceuticals
The majority of the prescription purchase process is handled by a pharmacy benefits manager (PBM), who acts as a sort of intermediary for private payers, state and federal programmes, sizable businesses, and other payer types. "PBMs have a considerable behind-the-scenes role in deciding total drug prices for insurers, controlling patients' access to prescriptions, and dictating how much pharmacy are paid,". PBMs negotiate with drug producers and pharmacies to manage drug spending. PBMs have come under increasing attention because of how much money they are spending on prescription drugs.
PBMs specifically maintain connections with the following three significant parties in the drug supply chain:
- PBM and drug maker: The PBM bargains with the drug manufacturer for a drug price and rebates. PBMs will add specific medications to formularies in return for rebates, guaranteeing a drug company will receive business.
- Health payer and PBM: The PBM oversees the payer's drug prescription list. In return, the payer pays the PBM for administrative support, the cost of the medication itself, and the cost of medication dispensing. The flat sum the payer owes should take into account any drug rebates the PBM received from the manufacturer.
- PBM and pharmacy: In some circumstances, a PBM will sign a deal with a local chemist to administer medication. They will indeed pay a medicine dispensing fee to the pharmacist.
What's The Big Deal About The Drug Company Rebates PBMS Get?
Drug producers contend that they are being forced to increase their list prices on their products due to the rising rebates they are paying PBMs. Manufacturer rebates to PBMs grew from $39.7 billion in 2012 to $89.5 billion in 2016, according to a recent analysis, largely offsetting increases in list prices. 4 PBMs argue that they've been giving insurers a larger portion of the rebates.
There is much discussion on whether PBMs should indeed be permitted to keep the drug manufacturer rebates they get, which are typically not made public. Some people think PBMs need to be required to "pass-through" all of these savings, or a bigger percentage of them, to insurance carriers and other payers. Insurers might utilise the gains to further lower customers' premium and cost-sharing payments if PBMs were mandated to do this.
Negotiating Process
If you keep a few key points in mind, the negotiation process for PBM services doesn't have to be difficult or drawn out. To maximise your organization's negotiation power for PBM services and save time and money, use the following advice.
- Never Hesitate To Request A Lower Price
You have the legal right and the moral obligation to seek a better price for PBM services as the employer buyer. Your relationships with your PBM will not be harmed if you request better terms, and neither will the quality of PBM services you get. You'll just become a wiser consumer as a result. That's advantageous for both your business and the gainful employees.
- Benefit From The RFP Procedure
PBMs frequently propose to renew the agreement at terms that are barely acceptable to retain the customer because they are aware that many businesses are reluctant to switch PBMs. You have a higher chance of extending with your present PBM at a price that is competitive with the market by releasing an RFP to examine various vendors.
- Don't Assume That There Aren't Any Better Alternatives
Many employers have given PBMs the advantage in negotiations due to the PBM industry's concentration. While it is unquestionably true that, there are more competitors to choose from, PBMs have very little room to grow their market share. Your PBM must continue to earn your business.
- Avoid PBM Services Contracts With Terms Of Three And Five Years
Many organisations sign three- or perhaps even five-year contracts with their PBM in the mistaken belief that this will result in lower costs. Furthermore, many companies dislike two-year PBM services agreements because they don't want to deal with the administrative burden of a biannual RFP. However, the PBM services sector and its price structures are evolving quickly. As a result, if you commit to a three- or five-year contract, you risk missing out on superior deals that might otherwise become available. A preferable choice would be to negotiate a two PBM services agreement that includes a third-year renewal option for the employer.
- A PBM Market Check Clause In Your Contracts Should Be Avoided
Many companies make the erroneous assumption that the so-called "market check" clauses safeguard them in the event that lower PBM service costs become available after they have signed a PBM contract. However, the PBM is nearly always favoured by this phrase. Additionally, it places the on on the employer to "show" that the pricing they received is less advantageous than what is happening in the overall market. For more information visit our website.
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