Change is coming to old pharmacy benefits models – here’s what it can mean for health care

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It’s no secret that the big health care conglomerates are increasing their power through verticalization. The Big 3 pharmacy benefit managers (PBMs) are vertically integrated with three big medical insurance carriers. And these conglomerates are making moves deeper into health care.

Take what’s happening in Oregon, for instance. UnitedHealth care and its pharmacy benefits subsidiary, Optum, have bought a few primary care and multi-specialty practices in the state. Reports followed of a physician “exodus” and patients feeling “fired.”

Kelcey Blair, PharmD
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Unhappy physicians, patients who lose access to quality care, unaffordable medications – is this the future of health care? Only if we continue to rely on the legacy pharmacy benefits models set up by the PBMs who own 80% of the market. And the good news is that innovation on these models is happening.

New models for drug pricing offer opportunities

The practices of PBMs to hold on to their profits are under scrutiny from regulators and could fill up an entire article. Inquiries into PBMs are valid, but many of them miss the larger point. Long story short: It all comes down to the money.

The root cause of the broken prescription drug system could be boiled down to this: Pharma knows what they pay in rebates to get the PBMs to include their drug on the formularies of employer-sponsored pharmacy benefits plans (it’s in the billions). Employers know what they spend in drugs for their employees and dependents (it’s going up). But these two health care players are disconnected from each other by the PBMs, who obscure the flow of money in their contracts.

But there are moves underway to cut out these middlemen. Some of the biggest drug makers are looking for ways to access patients directly – just look at the innovations in the red hot GLP-1 space. And new models are becoming available to connect employers and pharma manufacturers so they can contract directly for drug pricing. Pharma is clearly looking for new paths to market to get around the PBMs.

What does it mean for doctors and patients?

What does it mean for physicians? Think about formulary design, financial resource discovery, prior authorizations – all these requirements create administrative burdens on physicians and their staff. At a recent Senate Budget Committee hearing, one CEO shared that he spends $2.1 million a year on support staff to manage prior authorizations alone. A recent study extrapolated the time spent by physician practices on drug utilization management and valued it at more than $43 billion annually.

If you’re a physician, you know better than anyone the real burden behind these numbers. That pile of admin work could lessen in a world where PBMs get cut out, and employers don’t have to design benefits that offset the high cost of drugs with high deductible plans and high co-pays, which often initiate these mechanics in the first place.

Another exciting outcome? When there’s less money going to the PBM middlemen, there’s more for everyone else – including pharmacies and physicians. That means we may finally see a change in the intractable reimbursement issues that pharmacies face.

What’s more, new models will create more access to medication, which can help promote adherence and positive health outcomes. Because at the end of the day, physicians and health care professionals are in it to help patients lead healthier lives.

Kelcey Blair, PharmD, is the senior vice president for pharma solutions at Prescryptive Health.