The answer: Pharmacy Benefit Managers, or PBMs.
Companies and public programs providing prescription drug coverage hire PBMs for their expertise, and ability to reduce drug costs by negotiating for rebates and discounts from big drug companies and drugstores. It would be too expensive and complicated for employers, or other payers, to match PBMs’ ability to reduce drug costs, while providing access.
Though drug makers continue to raise prices out of proportion to increases in value, PBMs are doing their job by keeping drug costs down. A recent report by QuintilesIMS Institute showed that discounts, rebates, and other price concessions on brand-name drugs reduced overall drug spending by an estimated 28 percent in 2016. The report also shows that net price growth – the price payers actually pay – for prescription drugs is likely to remain in the 0-3 percent range, largely because of the work of payers and PBMs.
Having been involved as a clinician representing insurers and PBMs for more than 25 years, I know firsthand the importance of leveraging savings while ensuring that patients have the medications they need.
Specialty pharmacies dispense complex medicines, many of which are infused intravenously, or injected. They also manage patient care to optimize outcomes, reduce medication errors, manage and prevent side effects, and promote more affordable alternatives. Most drugstores simply don’t have the expertise to dispense specialty medications to patients.
It is easy to see that PBMs reduce drug costs, but often overlooked is the clinical value that they provide payers and patients. PBMs and PBM-affiliated specialty pharmacies work in coordination with their clients to carefully evaluate new drugs, review existing drugs, and apply sophisticated drug assessments that promote the best use of complex medications, and the appropriate use of mainstay drugs.
Pharmacists, doctors and other professionals employed by PBMs review the medical evidence for every drug approved by the FDA, assist in managing drug-related side effects and provide support to create formularies so that patients stay on their drug regimens and out of the hospital. That, in turn, lowers costs for patients and the entire health care system.
These formularies often organize medications according to their therapeutic effects and create logical sequences for their use based on clinical effectiveness, place in therapy according to national guidelines, and safety. Generic and lower cost brand medications can be incentivized before more expensive medicines because they work well for the majority of patients and have lower copays.
As the health care sector moves toward payment for value rather than volume, PBMs are providing expertise in developing and executing on these types of outcomes-based contracts that are intended to ensure that our pharmaceutical dollars are spent on drugs that provide the best outcomes.
These agreements require a high level of sophistication about drug use patterns and patient outcomes, as well as the ability to monitor and improve patient compliance and measure relevant outcomes.
As the public debate continues to unfold on health care and lawmakers are even hungrier to hear from better-informed voters, PBMs are part of the solution that lowers drug costs and improves quality.
Edmund Pezalla, M.D., MPH is a leading innovator and consultant on payer strategy for pharmaceutical and device manufacturers. He works with a variety of policy and industry groups on cutting-edge coverage policy, innovations in value-based payments, and adaptive regulatory and market entry pathways. Pezalla is currently a Scholar-in-Residence at the Duke-Margolis Center for Health Policy in Washington.