Exploring PBM Models: The Truth Behind Transparency

In a recent webinar with Health Action Council (HAC), Navitus’ Gary Hattendorf explains what transparency really means, and how it impacts pharmacy benefit plan costs. Here’s what you need to know.

To level-set the audience, Gary shared an overview of how the industry received significant bad press in recent news, which resulted in new legislative regulation. Last year, over 600 bills were proposed relating to PBM transparency and best practices at the state level.

DO YOU HAVE TRUE TRANSPARENCY AND WHAT DOES IT MEAN?

Gary described a quick analogy that compared PBM transparency to a glass window. “The more clear it is–the more transparent–you can see through that window,” he said.

Plan sponsors need to understand that transparency is not only a financial term – it’s also an operational way of doing business. Visibility into the cost and operational component of your drug benefit ensures you and your PBM are aligned.

He outlined a checklist of items that can help you determine whether your PBM is truly financially transparent.

wHAT’S DRIVING UP YOUR COSTS?

The industry focuses on savings. However, by understanding pricing components, you can begin managing costs. Gary explained that the discount percent difference or the difference between rebate ‘level X’ or rebate ‘level Y’ does not drive up costs. It boils down to how drugs are dispensed and managed for patients. And the mix of drugs on the formulary matters.

“An industry tactic is to tack on wasteful drugs. It doesn’t mean they are not useful, but it means that there are other effective drugs, that do just as well, that you should have on the formulary. And the ones that are five times more expensive – do you really need them on your formulary?” said Gary.

He also addressed how some PBMs may focus on high-rebate drugs versus the lowest-net-cost drugs. Plan sponsors must look at the complete picture. Some expensive drugs generate high rebates. Big rebates may appear to generate more savings, but it’s important to pay attention to the drug cost. Gary suggests choosing drugs that provide clinically sound, cost-effective alternatives using generics or less expensive brands. Each drug should be selected using evidence-based treatment guidelines and achieve substantial rebates without paying more, costing you less overall. The more expensive drug can be placed on non-formulary, with availability to patients on an exception basis.

Plan sponsors can further manage costs with utilization management tools, like prior authorization (PA) and step therapy.

wATCH OUT FOR DEFINITIONS AND fINE PRINT

Gary wrapped up the webinar by addressing what plan sponsors should look for in a contract. PBMs should be clear on all contract definitions and the fine print.

He explained, “Where there is mystery, there is profit. Where there is complexity there is profit. Where there is a tough time understanding, there is profit.”

How a PBM earns revenue could influence the decisions it makes to administer your benefit plan. Transparency is the key to ensuring that your PBM aligns with your financial, operational and philosophical goals. To ensure an alignment of interests, use a checklist to help you identify and achieve true transparency with your PBM.

Want to learn more? Watch our on-demand webinar to get an in-depth overview of the significance of PBM transparency and how it factors into your drug benefit.

Download our e-book and PBM Transparency checklist here.