Policymakers often identify insurance companies or pharmacy benefit managers as payers. This categorization is wrong and only adds to the confusion that surrounds our health care system. The fact is, employers, consumers and the government are the real payers in our current health care marketplace, with insurers and PBMs playing the role of middlemen.
Almost 50 percent (157 million Americans) of the U.S. population receive their health insurance through their employers. As such, employers need to be proactive in including policies in their drug benefit programs to protect themselves and their employees from overpaying for prescription drugs. To do so, employers should consider the following 12 principles.
One, employees should never overpay for a prescription drug when using their insurance benefit. Employers should insert a clause in the benefit design that states that employees will only pay what the insurer or PBM reimburses a pharmacist for if the reimbursement is less than the copayment for the drug.
Two, they should ask for audit rights and ensure that insurers and PBMs provide an accounting of all the concessions that have been collected on their behalf from the biopharmaceutical companies. The concessions should include all the rebates, fees, discounts, and any other payments provided to the insurer and PBM by the drug companies.
Three, employers should pay very close attention to the formularies set in place by the insurers and PBMs. There is evidence that insurers and PBMs prefer more expensive medicines over lower-cost alternatives such as generics or biosimilars. Although insurers and PBMs may claim that the net price is the same or lower, employers need to ensure that all the concessions gathered in calculating the net price are transparent and transferred to the employer.
Four, employers have done a relatively good job of ensuring that they garner most concessions, including fees for the retail prescription drug program. Unfortunately, they have not paid as close attention to the biopharmaceuticals covered through the medical benefit. These are medicines that are administered to the patients in the physician’s office or in hospital outpatient settings. Biopharmaceutical companies provide billions of dollars in concessions and fees to the insurers and PBMs for these drugs. Employers should insist that the savings and fees associated with drugs covered through the medical benefit are provided to them, similar to the retail pharmacy medicines.
Five, employers should insist that the brokers and consultants who act as the middlemen for insurer and PBM services disclose the financial incentives provided to them by the insurers and PBMs.
Six, employers should ask for bids from multiple PBMs when negotiating their employee drug benefit program. Not all PBMs are created equal as there are PBMs who are trying to inject transparent and net price contracting models into the marketplace.
Seven, employers should be aware of the specialty pharmacy programs offered by insurers and PBMs. Most rebates, fees, and other concessions are collected in the specialty biopharmaceutical market. Currently, PBM-owned specialty pharmacies control three-quarters of the market. Hence PBMs can control benefit designs, access and dispensing of medicines. Employers should enforce or request annual audits if the PBM contract requires them to use the PBM’s wholly-owned specialty pharmacy.
Eight, employers should ensure that spread pricing is not taking place. Spread pricing occurs when a PBM or insurer charges the employer a higher price for a prescription drug than what they reimburse pharmacies. On several occasions, the practice of spread pricing has resulted in overpayment by state Medicaid programs to the tune of several hundred million dollars.
Nine, when appropriate, employers should encourage their employees to pay cash for their prescription medicines if it is lower than the copayment or coinsurance they owe. Organizations such as Ro Pharmacy or Costco can provide most generic medicines at a significantly lower cash price than most copayment plans offered by insurers or PBMs. The chief executive of Ro summarizes the initiative as follows: “By removing the pharmacy benefit managers and the insurance companies we’re able to offer patients the same branded medication as an authorized generic at a lower price than if they used a coupon or most likely their insurance as well.”
Ten, employers should insist that all cash payments for any health care services or prescription medicines should count towards the employee’s deductible.
Eleven, employers should insist that maximizer or accumulator programs marketed by insurers and PBMs are not discriminatory, do not negatively impact patient equity and do not negatively impact patient adherence with their drug therapy.
Twelve, employers should insist that PBMs and insurers share the savings with their employees at the point of sale when a patient has a deductible or coinsurance. Although concessions are used to reduce premiums for employees, the magnitude and impact on premiums are overly inflated. In addition, there is evidence that such a policy will help improve medication compliance, which will lead to overall health care cost savings for both the employer and employee.
Employers need to take a far more active role in the development of their employee drug benefit designs. They have a responsibility to ensure that their employees’ health and economic welfare are protected, and they have the power to do so.
Robert Popovian is vice president of U.S. government relations at Pfizer Inc.
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