Are We Witnessing the End of the Pharmacy Benefit Manager?

As much as we’d like to think that every player in the healthcare marketplace is an integral part of the team, contributing to the health and well-being of our employees and saving employers money, it’s becoming harder and harder to support the ongoing abuses of pharmacy benefit managers, or PBMs. I won’t rehash them here. You can find past opinions about them in other posts.

Two discoveries this week at KBGH make me wonder if we’re witnessing the end of the PBM model. First, in a (unfortunately paywalled) editorial in the New England Journal of Medicine, Leemore Dafny describes the business model of a new drug company called “Civica.” Civica was launched in 2018 by seven health care delivery systems and three philanthropies to address chronic shortages of generic drugs, like IV antibiotics and sedatives, that are essential to inpatient care. Civica has since grown to sell about 50 generic injectable drugs to more than 1,500 hospital members. Their newest venture is the production of three “biosimilar” insulins (aspart, lispro, and glargine, which you may know better by their brand names Humalog, Novolog, and Lantus) that make up about 80% of the insulin market.

Here’s the important part: Civica intends to make its insulins available to “all U.S. pharmacies at the same wholesale price and on identical terms.” Everybody gets the same price, and Civica won’t engage in the usual PBM “rebate” trickery. It will print wholesale prices and the manufacturer’s suggested retail price right on the packaging! That MSRP will represent more than an 80% reduction from prices we’re accustomed to paying through PBMs, who keep about 60% of our money as “rebates” and other chicanery. The MSRP for a pack of five insulin glargine (a.k.a. Lantus) pens will be $55. Dafny invites us to compare that to the usual list prices of $425 for Lantus, $404 for Semglee, and $148 for unbranded Semglee.

The second cloud on the horizon for the future of traditional PBMs is Mark Cuban’s online pharmacy CostPlusDrugs.com. Instead of eliminating the PBM, Cuban has simply made the pharmacy and the PBM one and the same, with fully transparent pricing.

I don’t think we can carve the gravestone for PBMs yet; they surely have new tricks up their sleeves, and I expect legal action to be part of their strategy to try to delay companies like Civica from acting too quickly. But the tradewinds against the old, predatory PBM model seem to be blowing harder and harder. “This plan is straightforward: sell a drug at cost and at the same price to all buyers,” says Dafny of Civica. If only other health services operated the same way.

Quick tip of the hat to Drs. Bob Badgett, MD, and Kevin Wissman, PharmD, at the University of Kansas School of Medicine-Wichita for alerting us to these.

As the Medical Director of the Kansas Business Group on Health, I’m sometimes asked to weigh in on hot topics that might affect employers or employees. This is a reprint of a blog post from KBGH.

63% of What You Pay for Insulin Pays for Something Other Than Insulin

A landmark study (paywall) landed on our doorsteps last week not with a thunderous crash, as it should have, but with a gentle thud. Investigators from UCLA’s School of Public Policy published a cross-sectional analysis of where money paid for insulin actually went in the years 2014-2018.

An accompanying editorial (also paywalled) aptly describes the methodology of this research paper as “daunting,” given the difficulty in getting information in such an opaque marketplace. The investigators had to compile data on 32 separate insulin products from The SSR Health Rx Brand Pricing Data Tool, a commercial pharmacy claims database, CMS records, individual state Medicaid and drug transparency reports, and public filings of participant companies, including not only drug manufacturers, but drug wholesalers, pharmacies, pharmacy benefit managers (PBMs), and insurance companies themselves. Their methodology was complex enough that I’m not sure I completely understand it, and I’m confident I can’t pass it on to you in less than 800 words. So I’m going to get down to the nitty-gritty. First, here is their helpful schematic on the flow of money in the drug pipeline, which I found to be as good as about any explanation I’ve come across:

JAMA Health Forum

You can see that the key breakdowns in this complicated flow of goods and services are at points (2) and (7), where kickbacks from the manufacturer to the PBM (also known as “rebates”) are paid to move a drug up the formulary and where the PBM subsequently passes a share of those rebates on to the benefit plan.

Between 2014 and 2018, the average list price of the 32 insulin products rose 40.1% (inflation over the same period was 5.96%). So the list price of insulin rose eight times as fast as the list price of, say, dishwashers.

At the same time, though, the average net price paid to manufacturers fell by 33.0%. So, for example, Eli Lilly, the oldest insulin manufacturer in the United States, got $69.71 of every $100 spent on its insulin products in 2014. By 2018, they were getting only $46.73 out of every $100 spent.

Similarly, the share going to health plans (as those sneaky “rebates”) fell by 24.7%, and the share of expenditures retained by drug wholesalers increased by 74.7%, from $4.63 to $8.09, although the absolute costs were obviously low in comparison to others in the chain.

Reader, prepare your body for the coming rage (I recommend some light stretching and some John Tesh on the stereo). The share of insulin expenditures going to PBMs from 2014 to 2018 rose 154.6%, from $5.64 to $14.36 of every $100 spent. And the share retained by pharmacies increased by 228.8%, from $6.21 to $20.42.

If you can still read through all the red mist, let me reiterate this: Let’s say that you and your diabetic employee together pay ~$115 to insurance company X in December. Insurance Company X will then take its allowed Medical Loss Ratio of ~$15 and spend the remaining $100 on insulin. Of that $100, the breakdown of who gets what is below:

• Manufacturer: $46.73

• Wholesaler: $8.09

• Pharmacy: $20.42

• PBM: $14.36

• Health insurer: $10.40

Here’s the same information in graphical form, which is helpful to see the change over time:

JAMA Health Forum

Understand that about a quarter of people on insulin–your employees–report routinely skipping doses because of insulin’s tremendous expense. While those people are very likely shortening their lives because they can’t afford their drugs, PBMs, pharmacies, and to lesser extent wholesalers, are taking ever-greater shares of the money that you and your employees pay for the insulin, all while stiffing the manufacturer. I don’t mean to let the manufacturers off the hook; the pharmaceutical industry is the most profitable industry in America by a healthy margin. But we need to recognize that every participant in the distribution system for insulin, from the manufacturer to the PBM to the pharmacy, shares some of the blame for the astronomical increase in price that we’ve experienced over the last decade or more.

Outside of breaking out the pitchforks and torches, what can be done about this problem? A lot, we believe. As we’ve outlined before, you can look at your PBM contract to make sure you have access to your data, that you are allowed to access underlying contracts of your PBM, and that you can get out of your contract in a reasonable amount of time. With that information in hand, you can challenge new clinical approvals for low-impact drugs added to your formulary. You can even buy generics directly from the manufacturer. And, if you’re a member of KBGH, you could immediately cut pharmaceutical costs even without uncomfortable conversations with your PBM by working with our Right Rx program.

As the Medical Director of the Kansas Business Group on Health, I’m sometimes asked to weigh in on hot topics that might affect employers or employees. This is a reprint of a blog post from KBGH.

Do Medication Rebates Harm Patients? Yes.

Medication rebates are by now a time-honored part of employer-sponsored health insurance. How do they work? Let’s assume a drug costs $100. A substantial fraction of that, as much as $66 or more in the case of insulin, goes not toward the cost of the production of the drug, nor for pure profit on the part of the manufacturer, but back as a “rebate” to you, the employer (~90% on average, according to CVS and Express Scripts) and to the pharmacy benefit manager (PBM).

Let’s examine the incentives at work in this system. Imagine that KBGH Project Manager Matt Thibault were to invent a magically effective new cardiovascular drug tomorrow that cost only $2 per dose. This drug would soon be in the hands of every high-risk cardiovascular patient in America, right? Maybe not. At a price of $2, no PBM would likely be interested in having the drug on formulary because the potential for the PBM to make money off the drug in the form of rebates (or, for that matter, on spread pricing, a topic for another day) is tiny; any percent of $2 is a small amount of money.

Make that same drug $20 per dose and offer a 50% rebate split between the PBM and the employer, though, and now we’re getting somewhere. PBMs routinely move drugs up the formulary list in exchange for greater rebates. This has led to rebates being renamed, perhaps more accurately, as “kickbacks.” The incentives are aligned, then, to make sure the drug is as expensive as possible in order to maximize kickbacks to the PBM.

It would be one thing if consumers at the retail pharmacy level could see this happening and make a decision on where to buy their medications. But rebates are strictly confidential (although that may change soon). In order to keep rebates secret, PBMs also have to keep net prices—the cost of the drug after applying the rebate–confidential. To avoid having to say what the net price is, insurers typically require anyone with coinsurance to pay for a percentage of the retail pharmacy list price, not the secret net price.

It isn’t hard to predict where this system ends up. Drugs inevitably get more expensive, PBMs make more money than the drug companies they ostensibly help with supply chain issues, and patients (a.k.a., your employees) bear the burden in the form of increased list prices. A recent study in JAMA Health Policy (paywall) bears this out.

Investigators estimated the effective out-of-pocket share of drug costs that would have been paid by a hypothetical patient from 2014 to 2018, taking into account both initial coverage, a “coverage gap” (as in Medicare Part D), and a catastrophic coverage phase. In the study years, the average list price–what the drug costs, rebate included–per unit increased 29%. The average net price–the cost of the drug after applying the rebate–increased only 7%. The huge divergence between list and net prices was completely due to a 98% increase in average rebates.

This astonishingly high list-to-net ratio grew fastest for drugs with branded and generic competitors, from 2.7 in 2014 to 3.4 in 2018. The list-to-net ratio grew, but more slowly, for drugs with branded competitors only (from 1.4 to 1.6) and drugs without any competition (from 1.2 to 1.4). So we have yet another example in the paradoxical medical economy in which competition, rather than decreasing cost to the consumer, increases cost to the consumer (again, a topic for another day).

Americans do not overconsume medical resources. American health care is expensive almost exclusively because of flawed pricing structures. We simply pay more for any given service, medication, or outcome than people in peer countries do. Yet almost every intervention employers implement is designed to reduce consumption, and relatively few interventions are aimed at pricing. Rebates inherently increase the price of medications to the consumer and inevitably lead to less adherence to prescribed medications.

So don’t wait for new PBM transparency laws to take effect. Have a frank conversation about how you want medication prices to work in your employee health plan. A simple first step that doesn’t go all the way to a pure, “pass-through” PBM relationship, is to tell your insurer that you want to include “point-of-sale rebate pass-through” with your plan. This would pass the rebate payment through to the consumer (your employee) at the point of sale, reducing their out-of-pocket obligation by ensuring that their coinsurance applied only to the net price. Your employees will thank you.

As the Medical Director of the Kansas Business Group on Health, I’m sometimes asked to weigh in on hot topics that might affect employers or employees. This is a reprint of a blog post from KBGH.

Drug prices are getting more transparent, too

We’ve covered the waves of price transparency that are washing over health care the past few weeks in the KBGH Book Club and here in the blog: no more surprise medical bills, new public tools for comparing procedure prices, no more gag clauses on cost or quality, and others. But we haven’t talked about what’s coming in drug pricing transparency. Americans pay far, far more than peer countries for prescription drugs. Drug prices account for almost a fifth of our excess health spending, even more than administrative overhead and salaries. How bad is the problem? Americans make up less than five percent of the world’s population, but we account for 80% of pharmaceutical revenues.

It is easy to cast the pharmaceutical manufacturers alone as the bad guys here; they spend far more on advertising than on research and development, they are far more profitable than any other sector in the economy, they cannibalize profits to gift to shareholders, and they lobby Congress far harder than any other industry. But manufacturers are not the only players. The manufacturers only set list prices, which are publicly disclosed. Manufacturers negotiate rebates with insurers and pharmacy benefit managers (PBMs) in order to move their drugs up the list on the insurers’ and PBMs’ formularies. Rebates and discounts like this have grown to an astonishing extent over the past few years, leading to “net” prices for many brand-name drugs that are lower than list prices. As we’ve pointed out before, insulin has a typical rebate of 66%. Because the process is so opaque, consumers have no way of knowing the actual price paid for the drugs. Payers argue that this “confidentiality” (if you’re charitable; “secrecy” if you’re cynical like me) allows them to more effectively negotiate because transparency would only allow drug manufacturers to get net prices closer to their very high list prices. This is transparently false. If secrecy were such a tool for keeping costs down, the industry would not be fighting transparency rules. Instead, the manufacturers would be demanding more transparency to allow prices for their products to rise naturally. 

Manufacturers and PBMs have reason to be concerned because of the “Transparency in Coverage” final rule that was issued in 2019 as part of the usual flurry of executive orders that precede and accompany any presidential transition. The rule, which takes effect for plan years beginning January 1, 2023, requires that:

1.     insurers disclose the 1) current list price and 2) historical net price for prescription drugs,  

2.     the data be available in “machine-readable” files (that is, not blurry .pdf scans) online to allow for comparisons, and

3.     insurers provide real-time personalized estimates of cost-sharing. 

 Legal challenges may slightly change the final product prior to 2023. But the rule has unusually solid bipartisan support: both Presidents Trump and Biden support it, along with a clear majority of congressional Republicans and Democrats. So it will be difficult to overturn completely. This is all the more reason to make sure our employees are educated shoppers for health services moving forward.

As the Medical Director of the Kansas Business Group on Health I’m sometimes asked to weigh in on hot topics that might affect employers or employees. This is a reprint of a blog post from KBGH.

Amazon is a pharmacy now. Is that a good thing?

Amazon is now in the pharmacy business

Amazon announced just before Thanksgiving that it was entering the pharmacy business. On its face, this is a good thing. Amazon has grown so large that it is a de facto arm of the federal government, and it is incorporated as much as utility companies into many of our lives. The move isn’t sudden; some analysts have framed this as a natural extension of their 2018 purchase of PillPack, a pharmacy service to coordinate, organize, and deliver prefilled medication containers. So we can be confident Amazon will offer efficient, seamless delivery and good prices, two things that are often missing from our experience in American health care. It’s no surprise, then, that the announcement was catastrophic to the stock price of several pharmacies whose shares fell by a tenth or more. GoodRx, a quasi-pharmacy benefit manager (PBM) designed for discounts for uninsured and underinsured patients, lost a fifth of its value.

How it works

Amazon Prime customers will get medications delivered for free within two days. They’ll also qualify for discounts of up to 80 percent off generics and up to 40 percent off brand-name drugs. (some have pointed out that people who can’t afford Prime will be cut out of these offerings, an example of a systemic problem in American health care that Amazon won’t or can’t fix)

I did a quick road-test of Amazon Pharmacy today. The interface is, as one would expect, pretty intuitive and slick. If nothing else, Amazon has mastered simplicity. Just by seeing my routine demographics and the last four digits of my social security number Amazon was able to find my insurance information automatically, a task which I can tell you from both the physician side and the patient side is not easy. Then, after entering medications I currently take, I was given the option of transferring those prescriptions from my current pharmacy. I did not do this (my commitment to this project only goes so far), but it looked like the process would have been seamless on my end. I do not know what nightmarish snarl of paperwork it may have generated for my existing pharmacy or my doctor, though.

Allegedly, were I to have gone ahead and tried to check out, I would have been shown two prices: one with my insurance benefits, and one with my Prime discount. I would have chosen my preferred price, and the medication would have been delivered within two days. It remains to be seen how Amazon Pharmacy would handle one-off prescriptions for an infection or injury, although their same-day delivery in cities and by drone aircraft point toward that being a future feature.

Where do pharmacists fit in?

But the practice of pharmacy is more than the cheap, reliable delivery of medications. We at KBGH see pharmacists not as people who take pills out of a big bottle and put them into a small bottle to sell to you, but as highly trained medical professionals [note: KBGH has CDC funding to promote, among other things, team-based patient care including pharmacists]. Pharmacists’ training is toward the upper end of medical professional training in terms of time and testing requirements. After a minimum of two years of undergraduate classes with strict prerequisites (and some schools require additional coursework), pharmacists since 2000 have universally completed a Doctor of Pharmacy (Pharm.D.) degree, a four-year professional degree program which makes them eligible for licensure by their state Board of Pharmacy. The Pharm.D. degree is often followed by one or two years of a postgraduate residency program to increase the pharmacist’s depth of knowledge in a specific area of focus like inpatient care or chronic disease management. Pharmacists interested in research may do fellowship training beyond residency.

Pharmacists, like physicians, utilize “extenders” and technologies to increase their capacity. This theoretically allows pharmacists to spend more time on direct patient care roles like providing evidence-based medication recommendations, monitoring therapeutic responses to drugs like anticoagulants and blood pressure medications, and reconciling medications as patients transition from one care setting to another.

Pharmacists are capable of contributing to extraordinary patient outcomes. A meta-analysis of randomized trials, for example, showed that pharmacist + physician dyads are much more effective than physicians alone in treating patients’ cardiovascular risk factors. Teams with pharmacists had patients with blood pressures 8.1 mmHg lower, bad cholesterol levels 13.4 mg/L lower, and a 23 percent lower likelihood of smoking:

Some pharmacists, in collaboration with other practitioners, offer testing for high blood pressure, infections like strep throat, and markers of chronic disease management like cholesterol and blood sugar levels. In 2015 the State of Kansas authorized the creation and use of “Collaborative Practice Agreements” between pharmacists and physicians for patient care. Amazon Pharmacy has promised to try to virtually recreate the “counter conversation” with the pharmacist that many people desire, so while it is hard to see Amazon tiptoeing into the collaborative practice water any time soon, it is not impossible to imagine long-term. Amazon already offers telemedicine to its employees. Expect telemedicine for the rest of us next. And expect those telemedicine providers to work with Amazon Pharmacy somehow as the company learns what it takes to provide more comprehensive physician-pharmacy services. Maybe PillPack’s existing expertise in counseling will translate into more traditional brick-and-mortar pharmacy-style interactions. With time, it seems inevitable that Amazon will be labeled a preferred pharmacy for most health insurance plans. After that, it will surely follow CVS’s lead and become or acquire a PBM.

Staying out of stores is unquestionably safer in the COVID-19 age, a system-delivered advantage for Amazon. So if your employees begin using Amazon Pharmacy I’d make sure they know some basics, like that if they opt not to use their insurance but instead just take the Amazon Prime discount, their purchase may not count toward their health insurance deductible.

But for now, for complex patients with complex medication regimens that include potentially dangerous, potentially interfering drugs, the use of a community pharmacy familiar with your employees seems the most prudent course. Many community pharmacies already offer delivery and PillPack-like services designed for ease of drug administration, all with a more recognizable over-the-counter pharmacist interface. Grocery stores adapted when Amazon bought Whole Foods, and I would expect pharmacies to do the same.

As the Medical Director of the Kansas Business Group on Health I’m sometimes asked to weigh in on hot topics that might affect employers or employees. This is a reprint of a blog post from KBGH.

Transparency is Trust

As the Medical Director of the Kansas Business Group on Health I’m sometimes asked to weigh in on topics that might affect employers or employees. This is a reprint of a blog post from KBGH:

In 1963, Stanford economist Kenneth Arrow published the landmark paper “Uncertainty and the Welfare Economics of Medical Care.” He argued presciently that health care was an unfair system in which to bargain due to “asymmetric information.” The doctors, hospitals, and nurses simply know more than the patients, and this imbalance in information keeps the patient from being able to comparison shop or argue for fairer prices. If a doctor tells you you need a stent in your heart, after all, don’t you need it?

Equip patients with information and they usually make the right choice

There is data to suggest that patients, when given the right information to work with in a digestible way, make responsible decisions in health care purchasing. My favorite study on the topic looked at parents of children with appendicitis. Parents were randomized to see one of two videos: one group of parents saw a video that simply went over the difference between old-fashioned “open” surgery to remove the appendix and newer laparoscopic surgery that uses small “keyhole” incisions to put a camera and small instruments into the abdomen to remove the diseased organ. The video seen by the other half of parents explained the differences in the surgeries but also explained the price difference between the techniques (laparoscopic surgery is more expensive). Both videos stated that patient outcomes are similar with either procedure.

The parents who saw the video with the charge estimate were 1.8 times as likely to choose the open procedure. In fact, the effect of simply stating the charges in the video reduced the average price of the surgery from $10,477 to $9,949, a difference of $528, since more parents chose the open procedure when presented with good data. And more than a quarter of the parents choosing the open procedure said cost was the primary factor in their decision-making! This point is worth restating: parents, when confronted with a surgical choice in an emergency situation that, if handled incorrectly, could harm their own child, still took cost into account in their decision-making.

Things we’d hoped would work… but didn’t.

Many hoped the internet would solve the knowledge gap in medicine and empower patients. After all, in the business of buying and selling cars, some argue that information asymmetry is long-gone. If I were to buy a new Chevy Bolt today, I would simply choose my desired features on Edmunds.com, print the price sheet, and offer to pay my dealer a price in the ballpark of what Edmunds suggested was fair. But in spite of efforts from companies like Castlight, CashMD, and others, we haven’t seen a big dent in healthcare costs due to transparency alone. Some of this is due to the fact that doctors themselves–outside of the radical transparency of many Direct Primary Care physicians–aren’t always privy to the price of tests, drugs, or even their own services. And even those DPC doctors can’t necessarily share other outcomes we’re interested in, like rates of screening for cancer and metabolic diseases, mortality rates, and other quality indicators.

So the government has tried to step in. The Trump administration released an executive order in fall of 2019 requiring that by 2021 all hospitals must publish their “standard charges” online in a machine-readable format so that other software can begin to compare prices. This is a good start, but it is unlikely to work. Those “standard charges” are, in most cases, “chargemaster” prices that have little bearing on reality. Medicare, for example, pays about 31% of the chargemaster price. Second, patients mostly care about out-of-pocket payments, not insurance payments. To have an idea of their own liability, patients need the “bundled price” for the entire episode, which chargemaster prices do not provide. Instead, the chargemaster prices are for individual charges for materials and procedures

What CAN we do?

But we can’t just throw our hands up in frustration. As employers we should control what we can control. We can control state and federal policy as voters, but our power may be better wielded locally. We’ve pointed out previously in this blog that a lack of transparency was one of the big drivers of health care costs. That transparency extends beyond the operating room, exam room, or pharmacy. It reaches into the relationship between you and your partners, such as your broker, your PBM, and medical providers you may directly contract with. A good first step, if you weren’t able to attend our recent webinar with Dave Chase of Health Rosetta, is to ask for those partners to disclose all their revenue streams. Their undisclosed revenue streams may surprise you. Once everyone’s revenue is transparent, we believe that partners can work together in a more trusting relationship, to the benefit of both parties.

Note: KBGH works with Team IBX to introduce transparency in the insurance RFP process, but Team IBX was not involved in the writing and did not influence this post.

What's the Deal with Pharmacy Benefit Managers?

As the Medical Director of the Kansas Business Group on Health I’m sometimes asked to weigh in on hot topics that might affect employers or employees. This is a reprint of a blog post from KBGH:

What are pharmacy benefit managers?

Pharmacy benefit managers (PBMs) arose in the mid-1980s as third-party administrators acting as intermediaries in the drug supply chain. Their original purpose was to manage patient access to specialty drugs like insulin and chemotherapy agents through coverage and formulary design on behalf of payers. Medicare and Medicaid, for example, are forbidden by law from directly negotiating drug prices with manufacturers. Instead they rely on PBMs to negotiate on their behalf.

But many say that PBMs have grown too powerful and opaque. The three largest PBMs—Express Scripts, OptumRX, and CVS Caremark—now control more than 85% of the market, with revenues that exceed the very drug companies with whom they negotiate. For example, Dr. Trevor Royce and others reported in a recent JAMA editorial that in 2017, Express Scripts alone reported $100 billion in revenue, almost double Pfizer’s $52 billion. A business may find the sources of this revenue frustrating.

How PBMs make money

First, PBMs charge “supply chain fees,” theoretically in exchange for their information and efficiency advantages in running and managing the underlying prescription drug supply chain.

Second, PBMs traditionally engage in “spread pricing,” a fancy name for the simple practice of pocketing the difference between the manufacturer’s and insurer’s prices. Royce cites an Ohio Medicaid analysis that found that the cost to a pharmacy for a 30-day supply of the leukemia drug imatinib mesylate (Gleevec®) was $3859, with a cost to Ohio Medicaid of $7201, a difference of $3342, all of which went to the PBM.

Finally, PBMs take in substantial revenue from manufacturer rebates. The average rebate in 2008 was 10.4%. By 2019 the average rebate had grown to 26.1% (with an average of 66% for insulin). This would be great if that rebate were going to the employer. But instead the vast majority of those rebates go back to the PBM, which has caused administrators to label these rebates “kickbacks” instead. To make matters worse, some PBMs have used “gag clauses” to prevent pharmacists from telling patients when the out-of-pocket payment for a prescription would be less expensive than getting the drug through the patient’s health insurance drug benefit coverage.

Why does this matter to your business? Lauren Vela of the Pacific Business Group on Health said at the Kansas Business Group on Health’s 2019 Roundtable (paraphrased lightly):

“If you’re working with one of the Big Three PBMs, you’re not getting a good deal.”

What’s the solution?

We are unaware of any pending legislation in Kansas, though Ohio Medicaid managed care providers ended their contracts with PBMs in January 2019 and replaced them with a transparent “pass-through” pricing model.  In this new “pass-through” model, a managed care plan pays the PBM 1) the exact amount paid to the pharmacy for the prescription drug, 2) a transparent dispensing fee based on survey data of pharmacy dispensing costs, and 3) a transparent administrative fee (replacing the “spread pricing” revenue).

Federal legislation prohibiting “gag clauses” was signed in 2018. Early in 2019, Health and Human Services proposed legislation that would eliminate the practice of kickbacks to PBMs through drug rebates, but the legislation was abandoned due to significant pushback from insurers and hospitals.

So what can you as an employer do with your current PBM?

1. Challenge clinical approvals for new drugs that are added to the formulary

2. Buy generics directly from the manufacturer (yes, you can do this!)

3. Look at your PBM contract to ensure:

   • You have access to your data.

   • You are allowed access to underlying contracts of your PBM (they may be incentivized to push certain medications if they have an agreement with a certain pharmaceutical company).

   • You can get out of your contract at any time.

For ways to cut your pharmaceutical costs by 5-10% with ZERO risk and without having to change your PBM or your formulary, be sure to check out [KBGH’s] Right Rx program that is available to our members.