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July 12, 2018

Under the Magnifying Glass: Truly Transparent PBMs Should Support Government Efforts to Lower Drug Prices

iStock-157333811_capitol-building_duo_300x200Last month, President Donald Trump unveiled a new proposal aimed at lowering drug prices, reducing patient cost share and creating incentives to lower list prices for costly medications. Formally named the American Patients First, Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs, the plan includes over 50 initiatives that the administration believes can help lower drug costs. More recently, the Senate Finance Committee called for further action to reduce patient and government costs. The initiatives include:

  • Requiring manufacturers to disclose drug costs in advertisements
  • Prohibiting “gag rules” that prevent pharmacists from informing patients when they could pay less out of pocket by not using insurance
  • Expediting over-the-counter medication approvals
  • Increasing generic and biosimilar drug availability
  • Looking closely at the value of “perceived middlemen,” like pharmacy benefit managers (PBMs)

With headlines suggesting the government is targeting PBMs and using terms like “middlemen,” some feel PBMs are contributing to increasing medication costs, as many derive their revenue from the cost of each prescription filled. In reality, PBMs play an important role in securing lower drug costs. Because of their buying power, PBMs negotiate better pricing from pharmacies and manufacturers on behalf of their clients and members. Additionally, PBMs with deep clinical expertise are able to design formularies that offer lower cost alternative medications with equivalent therapeutic value. They also manage drug utilization at the individual patient level, ensuring each patient gets the right drug, at the right time, with the right support needed to improve health outcomes.

Concerns arise when it is unclear how much a PBM charges plan sponsors for a drug versus what the PBM pays. There are additional concerns that a PBM’s approach to formulary and clinical management may encourage utilization of higher cost drugs or make it more difficult for patients with complex conditions to access needed medications in order to drive utilization of their preferred drugs. This potential lack of transparency has many PBMs concerned about being placed under greater scrutiny and has plan sponsors looking for alternatives that provide improved clarity on their drug spending. It has also led to more health plans considering insourcing or co-sourcing the management of their pharmacy benefits in an attempt to gain more control over their drug spending and patient care.

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For over 17 years, EnvisionRx has been offering payers options for managing their pharmacy benefit, including our pioneering pass-through model that provides rebates and negotiated discounts back to plan sponsors, with the option for payers to share rebate savings with their members at the point of sale. Clear contract language and a straightforward administrative fee assures our alignment with the plan sponsor. And with the industry’s leading technology platform, transparent reporting and performance auditing is provided, down to the claim level.

While other companies offer pass-through pricing, some lock-in the rates that plan sponsors will pay for the life of their contract. Envision's clients and members benefit from our ability to negotiate improved terms through our pharmacy channels and with drug manufacturers because we continue to pass the improved pricing onto them throughout the life of the contract. Envision clients also benefit from our continuous monitoring of the drug pipeline and clinical care standards. As drug therapy options evolve, so does our approach to formulary and utilization management. By continually offering options for improved patient health, plan sponsors are assured financial motivations are balanced with clinically sound care.

Our lack of gag clauses is another example of our full transparency. A gag clause contractually prevents a pharmacist from telling a patient about lower cost alternatives for a prescription. As more and more low-cost generic drugs become available, many patients are actually paying more for their prescription by using their insurance rather than paying cash. An example of this is if a patient’s generic copay is $10, but the cost of the actual medication is only $7. Gag rules prevent the pharmacist from sharing this information with the patient. Additionally, some manufacturers have developed high-cost new formulations that consist of already available, lower cost medications. If not for gag orders, a pharmacist could recommend the less expensive drugs, saving a patient substantial money. As an example, Duexis® is a combination of ibuprofen, sold under the brand name Motrin®, and famotidine, an antacid, sold as the brand drug Pepcid®. Both are available over the counter for less than $20, but a prescription of Duexis costs over $2,000.

Some PBMs include drugs like Duexis on their formularies because, along with the higher price tag, they also provide a high rebate per fill, allowing PBMs to inflate their average rebate guarantees. While this looks appealing to payers when selecting a PBM, including such drugs on a formulary can cost the plan far more in unnecessary costs despite the associated rebates. In a pass-through model, revenue is not derived from rebate manipulation or dependent on “spread” in drug pricing, which means EnvisionRx remains focused on ensuring patients have the information they need and access to the lowest cost medications. With no gag clauses in our contracts, we support pharmacists telling patients about their options. This saves the patient money and costs the plan sponsor nothing. We also offer the EnvisionSavings prescription program to provide savings on medications not covered by insurance.

Our fully transparent prescription benefit management model aligns with the drug pricing goals of our government. By negotiating low net prices from drug manufacturers, sharing price concessions with our clients, and continuously educating and offering members cost saving options—even at the pharmacy counter— Envision is able to keep drug price growth to a minimum and help make medications more affordable for plan sponsors and the patients who depend on them every day. We’re supportive of improving disclosure of pricing, removing gag clauses, harder negotiations with drug manufacturers and better alignment of patient care goals with utilization management practices.

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