Transparent pharmacy benefits: a path to rational drug costs

Published by STAT

Now that states are moving to block pharmacy benefit managers from imposing “gag orders” on pharmacists, industry insiders and policymakers are sounding off louder than ever about the tendency for pharmacy benefit managers to extract value from the health system rather than add value to it.

A handful of these companies might be bucking that trend, and more could follow — with a push from business owners.

The increasing visibility given to pharmacy benefit managers (PBMs) hasn’t made these middlemen look particularly heroic. From the administration’s threat that “we’re very much eliminating the middlemen” to the throng of startups looking to stick it to pharma’s status quo, there’s no question that the national spotlight has cast an increasingly unflattering glare on these health plan and pharmacy go-betweens.

Prescription drugs account for an increasingly large share of what employers spend on employee benefits. Pharmacy benefit managers effectively control consumers’ access to these drugs. It’s their job to negotiate drug costs on behalf of the insurers they represent.

But pharmacy benefit managers are becoming well-known for their hidden fees, trumped-up prices, and kickbacks they receive from manufacturers in exchange for promoting specific medications. One of the industry’s biggest secrets is just how much of the savings they score for insurance companies ends up in their own pockets.

Which is why it was all the more surprising when a recent study by Ike Brannon at the Cato Institute and Anthony T. Lo Sasso at the University of Illinois at Chicago indicated that pharmacy benefit managers could advocate for patients, not carriers, at the prescription counter.

The workaround for the deliberate obscurity of these companies is deceptively simple: transparent pharmacy benefits. This model recasts the relationship between the employers at the helm of health care purchasing, the pharmacy benefit managers associated with that employer’s policy, and benefits consultants acting as liaisons. The goal of transparent pharmacy benefits isn’t to take pharmacy benefit managers out of the game, but to shift their positions so that they act as the pharmaceutical umpires for employers, rather than skewing the playing field for traditional insurers.

This may sound like a pipe dream. But a few pharmacy benefit managers are bringing this fantasy to fruition. And since employers are the de facto insurers for the vast majority of working-age Americans and their families, it’s employers who can make transparency pharmacy benefits the new norm in a dynamic and uncertain health care landscape.

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