Mixed Bag for Employers on Drug Benefits: Confusion Reigns
Many Employers Unclear on PBM Profit Sharing
A recent survey conducted by the Kaiser Family Foundation (KFF) revealed that many employers are unclear about what pharmacy benefit managers (PBMs) do with the money they receive for medications used by their employees. The survey found that 19% of employers receive most of the rebates negotiated by PBMs, 27% receive some, and 16% receive little. A staggering 37% of respondents were unsure.
PBMs: A Complex Industry
PBMs are companies that manage patients’ drug benefits on behalf of employers and health plans. They have been criticized for keeping a significant portion of the rebates they collect from drugmakers. In recent years, the pharmaceutical industry has attempted to deflect criticism of high drug prices by saying that PBMs siphon off a large portion of the rebates. PBM leaders argue that they save companies and patients billions of dollars annually by negotiating rebates from drugmakers and passing them along to employers.
PBMs: A Multi-Tiered Industry
The KFF survey poses a question: how many layers are involved in the process? "I don’t think they can ever know all the ways the money moves around because there are so many layers, between the wholesalers and the pharmacies and the manufacturers," said survey leader Gary Claxton, a senior vice president at KFF. This complexity can make it difficult for employers to understand where their money is going.
Critics Unite to Call for Transparency
Critics of the PBM industry argue that big PBMs, which are often linked to larger healthcare companies, may conceal the size of their rebates by negotiating through corporate-controlled rebate aggregators or group purchasers, mostly based in tax havens. They also profit from patent provisions and favors drug companies in exchange for listing drugs on their formularies.
Employers Frustrated by Lack of Transparency
The KFF survey highlights the frustration many employers feel when it comes to understanding the pricing policies of PBMs. "Employers are generally frustrated by the lack of transparency into all the prices out there," Claxton said. "They can’t actually know what’s true."
A Call to Action: Transparency and Oversight
The lack of transparency in the PBM industry has led to calls for change. Billionaire Mark Cuban has started a company to undercut the PBMs by offering pharmaceuticals with transparent pricing policies. "You’re getting ripped off, you’re losing money because it’s not your core competency to understand how your PBM and health insurance contracts work," Cuban said.
Conclusion
The KFF survey highlights the complexity and opaqueness of the PBM industry, leaving many employers uncertain about how their money is being used. The companies that manage patients’ drug benefits are inherently conflicted, as they profit from the very contracts they are negotiated. Transparency is key to addressing the concerns of employers and patients. It is essential to bring the PBM industry under greater oversight to ensure that the money intended for medication is being used for its intended purpose.
FAQs
Q: What do PBMs do with the money they receive for medications?
A: The KFF survey found that many employers are unclear about what PBMs do with the money they receive for medications.
Q: How do PBMs negotiate rebates with drugmakers?
A: PBMs negotiate rebates with drugmakers, which are often tied to the drugs’ list prices.
Q: What are the concerns of employers regarding the PBM industry?
A: Employers are concerned about the lack of transparency in the PBM industry, leading to frustration and uncertainty about how their money is being used.
Q: What is the impact of the PBM industry on drug prices?
A: The PBM industry has been criticized for its role in driving up drug prices, with critics saying that PBMs profit from the high list prices of drugs.
Q: What can be done to address the concerns of employers and patients regarding the PBM industry?
A: Greater transparency and oversight are necessary to address the concerns of employers and patients regarding the PBM industry.
