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PBMs' Cost Savings Skills in Specialty? Maybe Not So Special.

by NCPA | Jun 02, 2017

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When it comes to the spin that pharmacy benefit managers (PBMs) produce about their so-called cost savings, one often has to read between the lines to determine the truth.

The Pharmacy Benefit Management Institute (PBMI) publishes an annual "Trends in Specialty Drug Benefits" report based on a survey of employers. The 2017 report is based on responses from 298 employers split almost evenly between small (<5,000 lives) and large (>5,000 lives).

There is a wealth of data in the report about specialty pharmacy and the challenges employers are facing in trying to predict and contain specialty medication costs. There are a couple of bits of information in the 57-page report that are, however, particularly interesting.

There were significant differences between the small and large employer cohorts when it comes to the per-member, per-month (PMPM) trend from 2014 to 2015—and they weren't the differences you might expect.

Small employers had substantially smaller gross cost trend—year-over-year changes—for specialty medications under the pharmacy benefit as compared to large employers:

  • Of small employers, 9% had a flat/negative trend vs. just 3% of large

  • Of small employers, 44 % had a <10% trend vs. just 26% of large

  • Only 17% of small employers had a >21% trend vs. 28% of large employers

PBMI suggests that "this may be due to different benefit designs for large vs. smaller employers." There is a key difference that is referenced earlier in the report that just might be the cause of this variation:

  • Only 39% of small employers contracted directly with a PBM for pharmacy benefit management (the rest contract through an administrator)

  • However, 74% of large employers contract directly with a PBM

PBMs consistently argue that they save employers money and economies of scale should lead to the largest employers benefitting from the largest savings. Shouldn't these large employers be outraged that their trends are comparatively so much higher? Is it possible that PBMs are using their clout to benefit themselves rather than the employers they claim to help?

Calls for PBM transparency often revolve around the mysterious rebate system that proliferates the market. PBMs negotiate for rebates from manufacturers to help lower drug costs, and they claim to pass these rebates along to employers, which use them to reduce premiums for employees. However, the data doesn't quite hold that up:

  • Only 67% of employers report receiving ANY rebates back from the PBM (51% of small, 82% of large)

  • Of those who get rebates, only 34% of small employers and 49% of large employers receive 100% of the rebate. The rest get either a flat amount per script or a percentage share of the rebate with or without a minimum guarantee.

In the non-transparent PBM world, reading between the lines on reports like this is often the only way to glean details of contracts. NCPA will continue to call for increased transparency as, after all, sunlight is the best disinfectant.