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OPEN PRICING IN THE PBM INDUSTRY – DO YOU KNOW WHAT’S BEHIND THE SCENES?

 

John Gerzema, CEO of The Harris Poll, a leading public opinion, market research, corporate, brand, and reputation strategy firm1, said, "Transparency, honesty, kindness, good stewardship, even humor, work in businesses at all times."

Although dishonesty, misuse, and fraud are on the minds of many Americans when it comes to politics, in recent years, the pharmacy benefit management (PBM) industry has come under intense scrutiny to become more transparent, also. As pressures mount to effectively manage the cost of prescription drugs, plan sponsors have begun asking questions in an attempt to better understand the inner workings of PBMs, their revenue streams, and fee structures.

Sometimes contract confusion comes from the “spread model,” where the pharmacy is charged one price for a prescription, the plan sponsor is charged a higher price for the same product, and the PBM keeps the difference. 

Although there is nothing inherently wrong with the spread model (that is the typical American model, i.e. shopping at a grocery store, retail store, etc.), the plan sponsor is charged a higher price for the same product and the actual spread/margin can seem excessive.

Unlike the spread model, MC-Rx uses a “pass-through” or open pricing model, which bills the client the same amount paid to the pharmacy and charges clients a disclosed and fixed fee per member/per month, or a per-claim administrative fee2. Having an open pricing model guarantees that plan sponsors are never in the dark about their contract and are free to audit it at any time.

More than half of employers feel that PBM contracts are complicated and mainly benefit the PBM at the expense of the employer3. By being open on all fronts, it is MC-Rx’s goal to put our clients’ minds at ease by making ourselves open to shine some light on our contracts.

 

 

References

1 https://www.johngerzema.com/john-gerzema

2Hemphill TA. The "Troubles" with Pharmacy Benefit Managers. Regulation. 2017:14-17. https://object.cato.org/sites/cato.org/files/serials/files/regulation/2017/3/regulation-v40n1-5.pdf. Accessed April 3, 2018.

3Kuehner-Hebert K. What do employers think of prescription drug benefits? BenefitsPRO. https://www.benefitspro.com/2017/10/25/what-do-employers-think-of-prescription-drug-benef/?slreturn=20180327085914. Published October 25, 2017. Accessed April 27, 2018.