Why do medications cost so much? Majority of the blame goes to pharmaceutical companies — because they obviously control the prices. They can lower those prices however and whenever they want.
These companies, however, don’t deserve all the blame for the rising drug prices. There are many other “characters” that have control over drug pricing, including pharmacy benefit managers or PBMs.
PBMs get a substantial portion of its profits from rebates, which are one of the least transparent transactions PBMs usually control. Employers blindly focus on “guaranteed” rebate money instead of getting all of it, and while manufacturers pay billions in rebates to PBMs, employer-clients only get a small portion of it.
It’s time to stop being quiet about it and start upping your PBM cost control efforts.
Understanding How Rebates Actually Work
Rebates, in essence, are payments negotiated with pharmaceutical companies that return a certain amount of the drug’s value to the payer via the PBM. PBMs receive two types of rebates: 1) access rebate and 2) performance rebate. The latter is the only rebate a PBM will share with you.
So, when a PBM tells you that they’re sharing 80% of the rebates with you, they’re only referring to performance rebates.
How Much Employers Receive
So how much of the rebates, exactly, do PBMs share with their clients? The only known public answer comes from the new 2015-2016 Prescription Drug Benefit Cost and Plan Design Report of Pharmacy Benefit Management Institute (PBMI).
According to the survey, only about 75 percent of employers directly receive a portion of the rebates. Some get all of them, but others only get a portion—sometimes with a guaranteed minimum amount.
Stopping the Vicious Cycle
Most employers and beneficiaries do not recognize PBMs’ influence on drug pricing associated with pharmacy benefits. Many employers only have a basic knowledge of how PBMs actually earn profits at their expense.
To protect your interest, it’s important to gain knowledge of PBM processes. You, as an employer, also need to recognize that the money stops with you. Your employees can hardly negotiate for themselves, but you have the power to level the playing field in the drug-pricing game.
PBMs have grown into multi-billion dollar intermediaries — at your expense. So start changing the rules of the game, because if you don’t, you and other supposed beneficiaries will continue to lose.