Over the past two years, the global pandemic has produced significant changes in how we handle access to and utilization of healthcare services. Implementing solutions to these evolving challenges can be costly.In fact, the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) recently report U.S. health care spending rose to more than $4 trillion in 2020, the largest increase since 2002. Prescription drug spending alone grew 3% in 2020 to $348.4 billion.
Pharmacy Benefit Managers (PBMs) are essential intermediaries between insurance providers and drug manufacturers in the U.S. drug supply chain. Given rising healthcare costs, PBMs have come under increasing scrutiny for their role in high prescription drug costs and a lack of transparency about revenue streams. The government has launched investigations into prescription drug prices at the federal and local levels, and plan sponsors and their members are looking to PBMs to improve transparency, accountability, and affordability.
So what will the pharmacy benefit world look like in 2022? Will costs go down? Will PBM take a more accountable and transparent approach to its pricing model? Here are three predictions that will impact the PBM industry this year.
- Alternative PBM models will be in focus.
Over the years, the vast majority of PBMs have used traditional contracting methods, which often include hidden revenue streams from the PBM, driving up costs for plan sponsors. While traditional PBMs offer volume discounts and hefty rebates, they may retain rebates, discounts, and incentive compensation from pharmaceutical revenue. Spread pricing occurs when PBMs charge plan sponsors more than they pay pharmacies for a drug.
A growing number of plan sponsors and government entities reject this rebate-oriented approach and demand alternatives. The pass-through pricing model provides greater transparency to PBM’s financial and operational processes, where 100% of the rebates and discounts received are passed back to the program sponsor. There are no spreads involved in any pharmacy dispensing channel, so plan sponsors are charged the same amount as the pharmacy pays. This approach makes prescription drugs more affordable by removing unnecessary costs from pharmacy benefits, thereby reducing the overall net cost.
A growing number of policies aim to eliminate rebates altogether to make prescription drug costs more affordable, but pass-through PBMs are unlikely to be negatively impacted because they tend to be smaller private organizations. In today’s uncertain environment, program sponsors want stability. They will increasingly consider partnering with alternative PBMs with pass-through contracts that allow them to confidently go into the year ahead and regain control over their drug spending.
- Preventing fraud, waste and abuse will be a top priority.
Drug Fraud, Waste, and Abuse (FWA) is an important but challenging problem in healthcare. Fraud is when someone knowingly uses false information or representations to improperly get paid for a prescription drug. Waste occurs when overusing a service results in unnecessary costs. Abuse includes behavior that may result in unnecessary or increased cost of prescription drugs. FWA consumes resources and divert Billions of dollars are lost each year from patient care.
The expansion of telehealth during the pandemic has created new opportunities for FWAs, such as conducting fake virtual medical visits that allow unscrupulous providers to charge for expensive equipment or tests. These potential channels for committing to FWA have attracted the attention of program sponsors, making FWA prevention and management programs a high priority in 2022. PBM will place greater emphasis on its protection of program sponsor assets and through prevention, detection and investigation of FWA.
- Managing specialty drug costs will reduce pharmacy spending.
Specialty drugs are the fastest-growing segment of pharmacy spending, accounting for nearly half of total drug spending. Specialty medicines offer new hope for a growing number of patients with complex or chronic diseases, but at high costs.However, over the next decade, PBMs and specialty pharmacies will save Special drug costs and related non-pharmaceutical medical costs for payers and patients are estimated to total $250 billion.
Plan sponsors are seeking an integrated approach to address rising costs of specialty medicines, while still improving the quality and continuity of care their members receive. When it comes to managing specialty drug costs, more plan sponsors will rely on PBM to help them develop pricing strategies to improve their bottom line.
As the pandemic has raised new concerns about drug access and availability, pharmacy benefits have never been more of a priority. The current situation heading into 2022 will put the benefits of pharmacy under the microscope. Plan sponsors will evaluate their PBM’s pricing model to determine whether their contract will provide predictable costs, greater opportunities for savings, and better care for members.
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