Rethinking the Role of PBMs in Health Care Reform

Policy changes, such as banning spread pricing and delinking core issues, are crucial to realigning the pharmacy benefit manager (PBM) market and ensuring that the resources invested in health care go back to patients and care providers, claimed panelists at the Community Oncology Alliance Payer Exchange Summit.¹

The panel discussed the potential for direct contracting between employers and pharmaceutical companies as an alternative to the traditional PBM model, but noted the challenges in terms of the administrative burden for employers. Two of the panelists, Fred Barton and Joseph Shields, represented PBMs who are trying to change public opinion of PBMs, which are often viewed as middlemen that limit physician choices and make patient costs higher.²

A report from the Biosimilars Council evaluating IQVIA data found that rebate schemes orchestrated by PBMs have cost US patients and payers $6 billion by suppressing biosimilar adoption. | Image credit: MQ-Illustrations - stock.adobe.com

Additionally, a report from the Biosimilars Council evaluating IQVIA data found that rebate schemes orchestrated by PBMs have cost US patients and payers $6 billion by suppressing biosimilar adoption.³

During the panel, Shields—who is the managing director, founder, and president of Transparency-Rx, a coalition of transparent PBMs operating nationwide representing over 60 companies—explained that PBMs the prioritize transparency, often staffed by individuals from community and independent pharmacies, have long supported policies such as banning spread pricing and realigning resources to benefit patients and providers. Shields explained that misaligned financial incentives in the PBM market hinder cost savings, but transparent PBMs could reduce drug costs by 15% to 20%.

Barton, vice president of clinical product partnerships at AffirmedRx, followed with a discussion of his company’s mission to create a trustworthy PBM for employers. He emphasized the complexity of the PBM market and the need for a more straightforward approach. As a public benefit corporation, Barton said that PBMs like AffirmedRx prioritize public good over profit, aiming to simplify pharmacy benefits and increase value for members.

Mike Stancil, CEO of the Pittsburgh Business Group on Health, spoke about the public benefit corporation model's potential application to health care organizations. Stancil offered an employer’s perspective on navigating the complex PBM market, noting the disruptive potential of new PBMs. He explained how PBMs became the force that they are today, giving these organizations the benefit of the doubt that they started with good intentions.

"I don’t think it was nefarious from the start. I believe it was more a product of systems and heuristics—an attempt to solve a complex problem," he said. "It’s like when you give slime mold a maze with food at the end; it will navigate the maze and strengthen the path that leads directly to the food. Similarly, in the PBM space, as they developed the industry, certain offshoots turned into convoluted processes and wasted effort. Over time, they realized these convolutions allowed them to extract more from the system, so they kept them."

Stancil went on to explain how these convoluted systems, which were originally byproducts of an effort to address challenges in the PBM space, eventually became entrenched. Instead of streamlining processes, the convolutions created opportunities for added revenue. As the system evolved, PBMs relied increasingly on these convoluted structures to maintain and protect their profits. Now, employers who depend on the PBM system are tasked with navigating and fixing these complex arrangements, a responsibility that many find overwhelming.

Stancil detailed the challenges employers face in meeting fiduciary requirements under the 2021 Consolidated Appropriations Act and discussed how transparent PBMs can help employers navigate these responsibilities.

The conversation shifted to transparency's impact on drug costs. Legislative efforts were seen as crucial to driving transparency and accountability in the PBM market. Panelists discussed how policy changes, such as banning spread pricing and delinking core issues, could help realign the PBM market. Shields expressed a sense of urgency around these legislative efforts, with panelists noting that policymakers need to act quickly before the large PBMs can adapt and maintain the status quo.

The conversation delved into the challenges of achieving transparency in the PBM market. Barton emphasized the difficulty of educating employers and stressed the importance of policy reforms. The panel discussed breaking up vertical integration and fostering competition to improve transparency.

The session also explored the future of the PBM market, with Barton discussing the potential for employers to seek new PBMs and the need for collaboration and customized solutions. Stancil underscored the importance of allowing the market to find the best options, with direct contracting between employers and pharmaceutical companies emerging as a possible solution.

Shields concluded, “We think the market is fundamentally broken, and it's an industry that needs realignment, so that the resources that are invested in health care go back to the people that actually provided care and go back to the people that need it most: the patient.”

References

1. Barton F, Okon T, Shields J, Stancil M. Breaking open the PBM black box to introduce transparency. Presented at: COA Payer Exchange Summit; September 9-10, 2024; Reston, VA.

2. Caffrey M. In July, PBMs find themselves in the federal government hot seat. Evidence-Based Oncology. 2024;30(9):SP724. https://www.ajmc.com/view/in-july-pbms-find-themselves-in-the-federal-government-hot-seat

3. Jeremias S. Biosimilars Council: PBM rebate schemes cost Americans, payers $6 billion. The Center for Biosimilars^®. April 10, 2024. Accessed September 10, 2024. https://www.centerforbiosimilars.com/view/biosimilars-council-pbm-rebate-schemes-cost-americans-payers-6-billion