Response to Barrons Article “Pharmacy-Benefit Managers Under Pressure”: The Importance of Transparency

By Tim Thomas / On Aug.03.2016 / In / Width

The recent article “Pharmacy-Benefit Managers Under Pressure” published by Barron’s discusses how prescription drug prices are rapidly rising, how this affects employers and the reason behind the rising costs. At Crystal Clear Rx, we work closely with PBMs on a daily basis, and I can certainly attest to many of the points made within the article.
The Barron’s story points out that health care prices have risen 84% in the last decade and drug costs have risen faster than any other health care expense - 102% over the past decade and 14% in the past year alone. Although inflation plays a part, there is no logical reason for the Rx spend to be at this level over all other health care expenditures – until you consider how the role of Pharmacy Benefit Managers and their influence has changed over years. When drugs were a small percentage of overall healthcare spend, The PBM was often a ‘corner of the desk’ issue for most health care consultants. PBM profit tactics were not considered a ‘big deal’ when drug spend was so low. Therefore PBM’s were allowed to evolve with little scrutiny as to how they were contracting and making profits. However, as drug spend continued to rise many of these consultants realized too late that the complexity and ever changing nature of the Pharmaceutical delivery and contracting system has passed them by. It takes a pharmacy benefit management specialist to break down the contracting and financial system game that exists and evolves in this time and I will share a bit of this with you below.
Here is a quick breakdown of the typical financial relationship that exists between a PBM and its client - A PBM will guarantee the client a fixed discount off of Average Wholesale Price- for example - the PBM can tell a client they’re going to get 16% off brand drugs and 80% off generic drugs. Sounds like a reasonable proposition, right? Would you feel the same if you knew that some PBMs could in many circumstances, be able to ‘choose’ which drugs go into which brand or generic bucket? So a drug that we all consider a generic is now placed into the Brand Bucket for financial purposes? Why is that? Because the PBM is then allowed to inflate the AWP discount guarantees on a spreadsheet. We agree with Barron’s in the sense that we strongly advocate for a transparent model moving forward. We also advocate that using AWP as a pricing barometer does not make sense in this era where information is so much more readily available.
It is our belief that all employers have a right to see details of their Rx spend. It is important for employers to work with a Pharmacy specialist in order to better understand the “discount game” before making any decisions. There are third party consulting houses, like Crystal Clear Rx, that are in the business of helping employers review and correct language in their PBM contracts to ensure they are receiving the best possible value on their pharmacy spend. However, when choosing a Rx Consulting partner, make sure that the sole source of their revenue is paid to them by their clients. It is my belief that to be able to make unbiased recommendations, Rx consultants should not accept dollars from PBM’s . Make sure to ask this important question to the consultants as you interview them.

The Barron’s piece names Coca Cola, Shell Oil and American Express as some of the companies joining together to demand more for their health care dollar, but you don’t have to be a large company to seek out help tightening up PBM contracts. Crystal Clear Rx, and other companies like ours, help not only fortune 100 clients but we also help midsize companies achieve similar savings by walking the client through PBM process. When dealing with PBMs choose wisely - don’t go into a contract blindly. Having a consultant with experience and knowledge can make all the difference in your pharmacy benefits savings. We believe it’s time all deserve to get the best value on their pharmacy spend.