BUILDING BLOCKS > MANAGER > Benefit Administration & Organization

Pharmacy Benefit Managers

Does using an external organization to administer a drug benefit program
(or a prescription coverage plan) help contain expenditures for the manager/payer and individual?

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Policy Evidence

  • CMS issued new guidance against cost spreading, the practice when a PBM charges a health plan more than it pays a pharmacy for a prescription while pocketing the difference, for Medicaid plans, however, have not commented on commercial plans. source & source
  • The Drug Price Transparency Act, proposed in March 2019, would extend to the private sector the rule proposed by HHS that prohibits PBMs from receiving rebates from drug companies and requires all price concessions be reflected as discounts at the point of sale. source
  • The Senate Finance Committee passed Prescription Drug Pricing Reduction Act (PDPRA) that features increased oversight for pharmacy benefits managers (PBMs), such as prohibiting cost spreading, justifying charges to providers, and disclosing discounts. source
  • The Lower Health Care Costs Act proposed on May 23, 2019 has three components that address PBM contracting inefficiencies for self-funded employers. PBMs would be authorized to report drug pricing, prohibited from cost spreading, and mandated to pass through savings to employers. source
  • In 2019, the House unanimously passed two bills (HR 2115 and HR 1781) that would increase transparency on prescription drug rebates. Both bills aim to boost access to data to address concerns that PBMs may be causing drug prices to rise by favoring drugs with high list prices and large rebates. source & source
  • The American Society of Health-System Pharmacists (ASHP) formally submitted a review “The Prescription Drug Pricing Reduction Act (PDPRA) of 2019.” Some areas they support include improving manufacture costs including price transparency, inclusion of coupons in determination of sale prices, Medicare Part D redesign, and more. Some areas they believe need to be strengthened include public disclosure of drug discounts and audit restuls. source

Outcome Evidence

▪ PBMs are supposed to pass rebate savings on to consumers through health plans. A recent study found that the share of rebates PBMs passed through to insurers and payers increased from 78 percent in 2012 to 91 percent in 2016. source

▪ A July 2019 Government Accountability Office report found that 99.6 percent of prescription drug rebates negotiated by PBMs with drug manufacturers in Medicare Part D are passed through to drug plan sponsors and used to lower costs for Medicare beneficiaries. source

▪ A 2019 Society of Human Resources Management survey found three in four large employers do not believe drug manufacturer rebates are an effective tool for helping to drive down pharmaceutical costs. Employers reported adopting a recently developed capability by PBM firms to make rebates available to consumers at the point of sale, rather than having the PBMs collect the rebates and pass the savings back to employers and health plans. source

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