Strategies for delivering smarter pharmacy benefits

Pharmacy benefit managers (PBMs) have been acting as a middleman in the prescription drug supply chain since the late 1960s. For decades, their role has been seen as essential to insurance plans, but behind the scenes, they have the ability to influence which drugs are covered, how much they cost and who can get them.

This lack of transparency in the industry can put patients at risk, according to the American Medical Association. "As PBMs increasingly act in their own self-interest without transparency or accountability, drug prices rise and patients face health risks from cost-prohibitive drug treatments," noted AMA President Bobby Mukkamala, M.D. By adding unnecessary complexity and cost, PBMs often stand between patients and the medications they need. 

But the pharmacy benefits landscape is shifting. Consider these talking points:

1. Early signs of change began to emerge as technology entered the market.
The first cracks in the PBM system became visible when tools like GoodRx allowed members to see drug prices side by side, revealing that insurance wasn't always the lowest-cost option. For the first time, members could compare cash prices across different pharmacies. This enabled them to see that prescriptions filled at grocery stores or independent pharmacies could cost significantly less than the same medication at a major retail chain.

Then, grocery chains and big-box retailers began offering low-cost generic medication programs. Walmart launched its $4 prescription program in the mid-2000s, offering common, generic medications at affordable, flat rates — bypassing traditional insurance and PBM structures entirely. 

These low costs drew attention to PBM practices such as spread pricing wherein PBMs charge health plans more than they reimburse the pharmacy and keep the difference. However, PBMs continued to dominate the market by using their position in the system to influence where prescriptions were filled and how costs were passed along.

2. Supporting members in a complex system.
Direct-to-consumer programs, like ScriptCo and Mark Cuban's Cost Plus Drugs, were next. These programs let drugmakers or wholesale pharmacies sell directly to patients, cutting out PBMs. After seeing the success from wholesalers, we are now witnessing manufacturers trying direct-to-consumer programs such as Lilly Direct, which offers Zepbound to patients for about $400 per month, depending on dosage.

Compare that to a PBM-managed channel where the same medication can cost nearly $1,100. Part of that cost might be returned as a rebate, but it first goes through opaque channels and rarely helps the patient at the pharmacy level. The member could pay the full cost upfront, without access to the rebate that is paid. 

Finally, platforms like TrumpRx are coming online to give patients an easy way to compare prices and find discounted medications, acting as a guide to direct-to-consumer options. This allows people to see how much a medication costs outside insurance and PBMs.

3. Transparency is a start, but today's system is still disjointed.
Nearly every American will feel the impact of rising prescription drug costs and lack of transparency at some point in their lives. A recent NIH study found that prescription drug use in the U.S. reached record levels in 2020, with 6.3 billion prescriptions filled – roughly 19 prescriptions for every American.

Many of these prescriptions can be more expensive than necessary, or worse, members often have no clear way of knowing which options provide the most value. Confusing pricing and hidden fees make it difficult for employees to understand whether they are truly getting the best price for their medications.

For example, if an employee purchases a drug like Zepbound through Lilly Direct, that cost often doesn't count toward their deductible and the member misses out on the benefits of their insurance plan. On the other hand, if they decide to take the cheapest option, they may save money in the short term but lose out on coverage protections.

This creates a difficult situation for members: pay more through insurance to receive credit toward benefits, or pay less and lose that credit entirely.

4. Brokers need to lead the next phase.
The way prescription drugs are being distributed doesn't have to be as complicated or costly as it is today. Employers, advisers and brokers have an opportunity — and responsibility — to move beyond the status quo and provide solutions that put value and patient outcomes first.

We need to make transparency non-negotiable. Full disclosure of administrative fees, rebates and spread pricing practices is essential to ensure PBM incentives align with the best interests of employers and their people.  Furthermore, we need to remove members from the position of choosing between cost savings or coverage protection.  We need to deliver both to health plan members.

Can PBMs be a thing of the past? The question may not be whether PBMs will disappear entirely, but how their role will evolve or even begin to shrink. As brokers and advisers, we have a chance to tip the scales by focusing on what can make the greatest impact:

• Helping members access the care they need.
• Lowering the cost of medications.
• Reducing unnecessary profit within the system.

By digging in and asking the tougher questions, we can guide employers toward pharmacy benefit strategies built on clarity, value and a system that works for plan members.