Why Now Is the Time for Health Plans to Take Control of Pharmacy Benefits

Why Now Is the Time for Health Plans to Take Control of Pharmacy Benefits


Public outcries and federal scrutiny over high and opaque prescription drug pricing are fueling exciting new opportunities for health plans. After several decades of stable, steady outsourcing to pharmacy benefits managers (PBMs), payers are looking at fresh options for managing and administering the prescription drug benefits they provide to their members.

To set the scene for this shift in the making, consider the uptick in public scrutiny of PBMs this past year. In June, the Federal Trade Commission (FTC) announced it is investigating the role PBMs play as drug “middlemen.” Also last summer, a bill was introduced in the Senatebacked by a handful of Republicans and one Democrat, that aims to increase drug pricing transparency and hold PBMs “accountable for unfair and deceptive practices that drive up the costs of prescription drugs at the expense of consumers.”

PBMs negotiate with drug manufacturers on behalf of health plans, but their business practices influence drug prices and potentially drive up costs, so policymakers and consumer groups are rightfully questioning PBMs’ motives and role. One big reason for the increasing appetite to look into the PBM industry is that the largest insurance companies in the country own the largest PBMs.

Lawmakers and regulators aren’t the only ones questioning the PBM industry. A recent industry survey found that PBM satisfaction and net promoter scores (NPS) are in decline among health plans and employers.

With federal authorities taking aim at these pharmacy middlemen, health plans are considering steps they can take to regain more control of prescription drug benefits. Of course, the big insurers with captive PBMs will likely stick with the “traditional model” that has worked to increase profitability. But new and smaller health plans, regional insurers, health systems, employers, labor unions, and others that develop and manage their own health benefits programs have more incentives than ever to ask if they can do better than the traditional PBMs.

In working with these health plans, I have found three key themes that are prompting them to look for ways to take greater control of their pharmacy benefits:

Transparency and compliance

It’s worth belaboring the point: PBMs are under the watchful eye of state and federal governments. The PBM of the future isn’t a gas-guzzling, polluting SUV, for example, it is an efficient, state-of-the-art, fully customizable electric vehicle. It is regulatory compliant and uses the best technology to ensure equitable pricing methodology, financial value, and a great member experience.

Instead of shrouding drug pricing in secrecy, new PBM business models rely on transparency. The best way to create an efficient and fair market is to allow both the buy and sell sides of the transaction to communicate freely about how drug prices are set, rebates, and other essential information.

On the compliance side, plan sponsors must recognize and understand how their health plan drives revenue for their benefits brokers and consultants (e.g., are they compensated for recommendations on pharmacy benefits or any other aspect of health benefits?). The Consolidated Appropriations Act of 2021 places new fiduciary responsibilities on entities that provide health benefits, and plan sponsors must ask their broker or consultant to disclose how they’re compensated.

Improving the member experience

The members of an employer-sponsored health plan don’t have a say in choosing the PBM. From an ease-of-use standpoint, PBMs historically rate low. Anyone who has tried to obtain a new prescription or refill of specialty medications can attest to the number of hoops to jump through to get their medication. Also, the delays caused by insurance approvals and requirements to use a PBM’s mail-order operation can cause significant harm to patients.

Health plans looking at new options for pharmacy benefits want to improve the member experience. Benefits designed with member experience in mind – especially when it comes to more personalized choices – are more likely to lead to member or employee loyalty and lower costs.

Efficiency through technology

Ensuring a better member experience often requires the use of technology and workflows that aren’t possible by going the traditional PBM route. Since PBMs have built up their technology stack over decades, they find it difficult and expensive to maintain and upgrade these antiquated systems.

The administrative costs of processing pharmacy claims add up. Technology-forward pharmacy benefits administration platforms can automate and scale administrative processes to reduce overhead expenses, allowing savings to pass to prescription drug consumers.

Whichever route a health plan decides to go with prescription drug benefits, one thing is certain: There are more options than ever. Health plans today must consider what they want out of their pharmacy benefits and how to achieve something better for their members. And when they look at new platforms and processes that provide greater transparency, improved member experience, and simplicity in establishing and maintaining the technology, they’re likely to find that they don’t have to do things the way they always have.

Picture: Ligorko, Getty Images



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