Fiduciary PBM

Tip of the Week: Fiduciary Model Pharmacy Benefit Managers (PBM) are a Thing

Clayton Christensen’s business concept of “The Innovator’s Dilemma” is one of my favorite books. In it he writes about how incumbent companies lose to new business models because they are too busy protecting their older legacy business models. Non-fiduciary PBMs don’t focus on a fiduciary standard of care or radical transparency because they are too busy protecting their older, opaque business models. 


Disruptive innovations tend to be produced by outsiders and entrepreneurs in startups, rather than existing market-leading companies. The business environment of market leaders does not allow them to pursue disruptive innovations when they first arise, because they are not profitable enough at first and because their development can take scarce resources away from sustaining innovations (which are needed to compete against current competition). Small teams are more likely to create disruptive innovations than large teams. A disruptive process can take longer to develop than by the conventional approach and the risk associated to it is higher than the other more incremental or evolutionary forms of innovations, but once it is deployed in the market, it achieves a much faster penetration and higher degree of impact on the established markets.

TransparentRx is the first fiduciary model PBM in America and now another PBM, Drexi, has joined the ranks of the disruptive. From the press release, “Advanced Medical Pricing Solutions (AMPS), a pioneer in healthcare cost containment, is pleased to announce the expansion of its fiduciary duties to include Drexi, its pharmacy benefits manager (PBM) solution…The expansion makes it one of the first PBM fiduciaries in the U.S.” I like how they were careful to write “one of the first.”

We welcome the competition as it benefits the market – plan sponsors, patients and other stakeholders. It also makes our job easier when explaining the difference between a fiduciary PBM and one that isn’t to a potential client. I’ve not yet personally had a chance to review the AMP’s PBM service agreement so I can’t comment on whether or not the contract nomenclature is truly fiduciary in law and spirit. Here are some things employers must look out for when considering doing business with a fiduciary PBM.

1) PBM or Pharmacy Benefit Administrator (PBA) provides radical transparency

2) Any revenue currently collected by the PBM from the manufacturer or rebate aggregator is disclosed and employers receive 100% of these earned refunds (less data fees) 

3) Gives full auditing rights in PBM contracts including unrestrictive access to claims data

4) Fiduciary PBMs are substantially at risk. $100K on a $10M drug spend is not substantial

5) No exclusivity. The primary reason PBMs suggest you not carve-out is due to their own selfishness. Despite what they tell you it is not because carve-in adds more value. They only share the good it does not the harm. Caterpillar has carved-out PBM services for more than a decade with much success.

6) Elimination of spreads. In some cases, a PBM will charge the plan sponsor more than they pay the pharmacy to fill a prescription.

In business theory, a disruptive innovation is an innovation that creates a new market and value network and eventually displaces established market-leading firms, products, and alliances. I’d be worried if my wagon were hitched to a PBM holding on to old legacy business models.

Mississippi AG Files Lawsuit Against Insulin Manufacturers and PBMs over Insulin Pricing Scheme

The Mississippi attorney general last week filed a lawsuit accusing several drug makers and pharmacy benefit managers of conspiring to set prices for insulin, the life-savings diabetes treatment that has become a poster child for the high cost of prescription medicines. 

Learn More

The lawsuit alleged that the manufacturers benefited from a scheme in which prices were “artificially” inflated to win placement on formularies, the list of medicines for which insurance is provided. And pharmacy benefit managers profited by receiving “secret” rebates from the manufacturers and also through their own mail-order pharmacy sales. In the alleged scheme, the Manufacturer Defendants artificially and willingly raise their reported prices, and then deceptively refund a significant portion of that price back to PBMs through things called rebates, discounts, credits, and administration fees. 

Tyrone’s Commentary:

I’ve been teaching and writing about how non-fiduciary PBMs engage in self-dealing for 9.5 years. Check the first blog post. Some of my readers have become clients others were dismissive. Are you listening now? The amount of money some PBMs are printing, based primarily on predatory behavior, is wrong. Don’t be the last one to the party. Overpayments to PBMs isn’t just about money. These overpayments impact the level of care patients receive – health care outcomes. Don’t wait another decade before you take decisive and corrective action.

They [PBMs] also switch medications within their formularies to suit their pricing scheme to the detriment of diabetics relying on those drugs the lawsuit alleges. This practice has resulted in record profits for Defendants at the expense of diabetics and payors. 

<<Read Full Article>>

What’s Worse Than Overpaying for Pharmacy Benefits? Believing You Aren’t.

Alabama Gov. Kay Ivey for signed into law legislation (Act 2021-341) on May 6 which further regulates pharmacy benefits managers (PBMs) and helps ensure that reimbursement rates cover pharmacies’ costs of purchasing drugs.

The measure – sponsored by Republican State Sen. Tom Butler – becomes effective on July 1 and will apply to PBM contracts on and after October 1.

Specifically, the legislation states that PBMs may not “vary the amount a pharmacy benefits manager reimburses an entity for a drug, including each and every prescription medication that is eligible for specialty tier placement by the Centers for Medicare and Medicaid Services.”

Additionally, PBMs are prohibited from reimbursing an in-network pharmacy or pharmacist in the state an amount less than the amount that the pharmacy benefits manager reimburses a similarly situated PBM affiliate for pharmacist services for patients in the same health benefit plan.

Among other provisions, the measure also states that a PBM may not:

• Charge a pharmacist or pharmacy a point-of-sale or retroactive fee or otherwise recoup funds from a pharmacy in connection with claims for which the pharmacy has already been paid.

• Exclusively require the purchase of pharmacist services through a mail-order pharmacy or PBM affiliate.

• Impose a monetary advantage or penalty under a health benefit plan that would affect a patient’s choice of pharmacy.

• Deny a pharmacy or pharmacist the right to participate as a contract provider if they meet and agree to the terms and conditions of the PBM’s contract.

• Prohibit a pharmacist or pharmacy from informing a patient about a more affordable alternative prescription drug if one is available.

Tyrone’s Commentary:

Non-fiduciary PBMs have been planning for at least five years the day when they could be forced to provide more transparency. They knew most of their clients didn’t have the desire to do it themselves. Forgoing rebates in exchange for a medical administration credit, is just one example. It isn’t a better deal for you. It is a way for the non-fiduciary PBM to hide cash flow and to protect their profits. Vertically integrating their businesses is another example. It doesn’t lead to lower net costs for their clients. However, it does make for a very appealing marketing presentation. Keep a watchful eye out on your medical benefit drug claim costs. The non-fiduciary PBM will have to shift the cost somewhere, charge a PEPM fee north of $30 or a combination of the two.

AIDS Healthcare Foundation Taking Tough Stance on PBMs – Pharmacy Benefit Manipulators, Really?

In response to growing consolidation and increasingly monopolistic behavior in the pharmacy and health care industries, AIDS Healthcare Foundation (AHF) is launching a new advocacy campaign to take on pharmacy benefit managers (PBMs) that are undercutting community pharmacies and driving up drug prices.

The national campaign aims to raise awareness about PBMs’ undue influence on patients’ access to the prescription drugs they may need and to educate the public and press elected officials to call out and prevent PBM abuses. The campaign also hopes to rein in the abusive industry, which broadly functions as middlemen between insurance companies and pharmacies.

AHF’s ‘Stop PBMs’ campaign will include direct and online community mobilization, legislative outreach, online and print advertising, a website, social media posts and more, all urging greater regulation of these corporate health care middlemen that are driving up drug prices. According to AHF, Ryan White contract pharmacies & independently owned pharmacies are being hurt by PBMs in several ways:

(1) PBMs often enforce mandatory mail order of prescription drugs by their patients/clients, and

(2) Force expensive drugs onto patients

(3) Send six months’ worth of medications that may, or will expire

(4) Send refrigerated medications that will go bad sitting on doorsteps

(5) Force pharmacies into accepting reimbursement that doesn’t cover their costs through take it or leave it contracts and abusive practices like clawing back reimbursements months or years after payment.

Tyrone’s Commentary:

If you’ve read any of my previous blog posts you know that I give non-fiduciary PBMs no slack. I just personally believe it is better to do a lot of good and make less money then to make a lot of money and do harm. That being said, most of what AHF is purporting is spot on but one thing bothers me. The finger always gets pointed at the PBM. Plan sponsors rarely take responsibility for their role in how the pharmacy benefit is managed or what it ultimately costs. No one ever says, “You know we really suck at managing our pharmacy benefit no wonder our PBM takes us to the cleaners. Maybe we should get smarter about how to manage the darn thing.” PBMs generally rely on the demands of their clients for how much information they disclose and how close you get to lowest net cost. If you are overpaying, it is likely your own fault. The non-fiduciary PBM is simply leveraging the purchasing power of its unsophisticated clientele. 

<<Continue Reading>>

Tuesday Tip of the Week: PBMs can be Fiduciaries

It’s not important to me who is right or wrong. I’m focused on making sure plan sponsors get the right information. Ohio’s Attorney General in 2019 called for PBMs to be fiduciaries. Still there is doubt among commercial and public sector employers, unions, health plans and health systems whether a PBM can act as a fiduciary. Very few purchasers of PBM services are asking for a fiduciary model in their pharmacy benefits management request for proposals, for instance.

Pass-through and transparent PBM business models don’t inherently eliminate wasteful and duplicative spending. Because these models thrive on optics and not delivering lowest net cost, they can leave plan sponsors mired in the status quo. In their middleman role, PBMs have used secrecy and subterfuge to pad their own profits instead of passing savings along to customers. John Paul Jones wrote, “It seems to be a law of nature, inflexible and inexorable, that those who will not risk cannot win.” 

 
Click to Learn More

“When state agencies entered into these nebulous deals with PBMs, they unknowingly hired a fox to guard the henhouse,” Yost said. “But he was a smart fox. He didn’t kill the chickens; he helped himself to the eggs.” The attorney general recommended “a solution based on market principles” identifying four objectives that should be met:

1) State drug purchases should go through a master PBM contract that is administered through a single point of contact.

2) The Ohio Auditor of State should have unrestricted authority to review all PBM drug contracts, purchases and payments.

3) PBMs must be fiduciaries.

4) Nondisclosure agreements (NDAs) on drug pricing with the state must be prohibited.

What was the broker or consultant’s role in that situation? There are situations where you have someone who is trying to prove that they’re valuable by trying to play hardball with people and spin it as if they are looking out for you. On March 15, 2019 AG Yost filed suit against OptumRx on behalf of the Ohio Bureau of Workers’ Compensation seeking to recover nearly $16 million in overcharges to the fund intended to protect injured workers. 

 
A fiduciary standard cannot be forced upon PBMs at least not yet but AG Yost acknowledges, albeit implicitly, PBMs can be fiduciaries if we so choose to put our clients’ interests above our own.

Continue Reading >>