Pharmacy benefit managers play a critical role in the pharmacy industry. Their involvement has long been a hot-button issue for independent pharmacists. Depending on who you ask, pharmacy managers can hurt or help pharmacists.
PioneerRx surveyed pharmacy professionals to find out how pharmacy benefit managers affect them. Read on to learn about PBMs and their impact on the industry.
The Commonwealth Fund defines a pharmacy benefit manager (PBM) as “[a company] that manages prescription drug benefits on behalf of health insurers, Medicare Part D drug plans, large employers, and other payers.”
Some of the top pharmacy benefit management companies include (along with their market share):
To put it in perspective, three of the biggest PBMs account for 80% of the industry’s market share. The fourth biggest — Humana — has 8%.
PBMs are said to be the middleman between insurance plans and the pharmacy. However, their presence in the industry isn’t a passive one; and it’s often harmful to patients and the pharmacies that serve them.
PBMs affect patients and pharmacies in many ways.
First, PBMs play a major behind-the-scenes role in determining drug costs for drug patients. This affects how much pharmacies are reimbursed when they fill a prescription.
Second, PBMs can shape a patient’s formulary, directly determining what medications they are able to take.
A patient’s formulary can adversely affect their health journey if it doesn’t cover certain medications. This usually happens to favor a pharmacy benefit manager and their relationship with a given drug manufacturer.
Third, PBMs can also force patients to pay a higher copay or pharmacies to receive a lower reimbursement for their services.
There’s also what’s known as a “gag clause,” a “requirement PBMs wrote into pharmacy contracts that prohibit pharmacists from disclosing to patients that a drug may be less expensive if paid for directly without using insurance.”
With gag clauses in place, patients pay more with their insurance plan when the out-of-pocket costs are less expensive.
A JAMA study revealed that copays were higher than the cash price for one of four drugs purchased by Medicare Part D patients in 2013.
What’s more, these patients overpaid for their medications by more than 33 percent for 12 of the 20 most commonly prescribed drugs.
The gag clause prevents pharmacists from informing their patients that they could be paying less for their medication, putting them in an ethical dilemma.
A pharmacy benefit manager also uses direct and indirect remuneration (DIR) fees to receive even more compensation after the pharmacy sells the prescription. This further lessens how much profit a pharmacy receives from filling a prescription.
DIR fees have increased by 91,000% over the past 10 years, which further shows the increasing presence of PBMs.
Independent pharmacies deal with PBMs every day, but how much are they affected?
PioneerRx surveyed pharmacy professionals about PBM impact. Here’s what they had to say:
All respondents agreed that they worry about the impact PBMs have on their independent pharmacies. This figure is indicative of how pharmacists mostly feel about PBMs.
Over half of survey respondents were either “somewhat familiar” or “not familiar” with PBMs.
The healthcare industry is a complex one, and the inner workings of PBMs only reinforce that idea tenfold.
PBMs purposely use language and contractual terms that are difficult to understand. Many PBMs use “confusing, unfair, opaque, and arbitrary” contractual terms that unfairly affect pharmacists.
All respondents feel that pharmacy benefit managers are not properly regulated. Several U.S. states have introduced legislation, fair pharmacy audits, and registration programs to create a more level playing field.
Visit NCPA’s PBM Reform page to learn more about what states are doing in response to PBM practices.
Though several state governments have taken steps to counteract certain PBM practices, the majority of respondents feel that it isn’t enough. It is worth noting that some states do not have any PBM-based legislation.
To keep up with PBM activity in your state and across the country, visit our Pharmacy Laws and Regulations page.
The majority of survey respondents took to reducing their own profit or payroll to mitigate predatory PBM activities. Some reduced services and others took additional measures (including changing services, focusing on retail sales, and filling more cash prescriptions).
Our survey results shows that independent pharmacists have little faith in PBMs. They directly impact how pharmacists run their businesses, usually for the worse.
Though several states have passed legislation to keep PBMs in check, they largely run without many restrictions.
Though the future looks brighter for independent pharmacists, there is still a need for greater communication and transparency between pharmacists and PBMs.
