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What Does the Future Hold for PBMs? Implications for Oncology Practices

October 2018, Vol 8, No 10
Dawn Holcombe, MBA, FACMPE, ACHE
President, DGH Consulting, South Windsor, CT

Pharmacy benefit managers (PBMs) have been seeking greater influence in the oncology market for several years. They are contracted by health plans and employers to manage the drugs covered under pharmacy benefits, which may include newly approved drugs added to the plan; provision of operational controls, such as step edits; prior authorizations; formulary restrictions; and the review of medical necessity for oral medications. PBMs have increasingly presented themselves as capable of managing the medical benefit of drugs, as well as those provided by physicians and billed as part of the physician services. PBMs traditionally offer services to their patients that include:

  1. Formulary and drug rebate management
    • Identifying best-value agents
    • Seeking manufacturer rebates
    • Identifying drug tiers and benefit design
  2. Drug and therapy management
    • Using clinical pathways to justify prior authorizations
    • Educating patients
    • Managing side effects
    • Drug utilization review
    • Partial-fill programs
  3. Drug utilization management
    • Step edits, prior authorizations, and quantity limits
    • Encouraging the use of lower-­cost drugs when appropriate
  4. Pharmacy network management
    • Identifying preferred specialty pharmacies for patients
  5. Plan design modeling and support
    • Recommending closed and limited pharmacy networks
    • Suggesting patient copay and other payment tiers
  6. Reporting prescription issues
    • Identifying fraud
    • Reporting on medication fills and compliance
    • Tracking outliers.

PBMs face the problem that they have had only sporadic success in providing these services. They do not have access to the patients’ medical records (which are held by the treating physician). They often are late in identifying eligible patients for management, especially those who receive treatment under the medical benefits. Their automated calling systems and occasional actual nurses and case managers who reach out to patients may be confusing to patients, and responses and compliance are not strong. PBMs exact fees, collect rebates, and determine network participation rights for pharmacists and now-dispensing oncologists, in ways that are increasingly being challenged.

I have been attending meetings in the payer and employer communities for several years, and have noticed a sharp rise in the number of panel discussions among these customers of PBMs who are calling into question the value of PBMs as middlemen.

Contracting Challenges

Linda Cahn, Esq, Founder and President, Pharmacy Benefit Consultants, spoke at the 25th Annual National Conference of the Florida Health Care Coalition about employer and health plan contracting with PBMs. Ms Cahn addressed the lack of transparency in contracting, and the lack of clarity of accountability terms that are self-defined in the contracts and then self-reported, if at all, by PBMs, thereby leading to no accountability. She suggested that there be careful scrutiny about rebates and the frequent underreporting and lack of transparency about every dollar that a PBM collects from manufacturers and providers under the auspices of executing a contract as a PBM middleman. It was interesting to watch more than 100 business leaders taking copious notes on the contracting challenges that Ms Cahn was recommending for review.

I also track proposed and pending legislation in every state across the country. It has been surprising to watch the frequency of new legislation proposals in 2018 that seek to limit the control that PBMs exert over pharmacies. In February 2018, Maryland proposed several bills, including House Bill (HB) 1376, which sought to restrict fees that PBMs added to pharmacies; HB 1402 regarding PBMs’ ability to restrict pharmacy choices; and HB 1546, which sought to restrict PBMs making prior authorization requirements in specific circumstances; all 3 of these bills were withdrawn.1 The Arkansas Pharmacists Association challenged the PBMs, and in March 2018, the governor signed a law requiring state regulation and licensing of PBMs.2 Five additional states (Alaska, Florida, Louisiana, Maryland, and Tennessee) added laws in 2018 requiring the licensing or registration of PBMs before conducting business in the state.3

States’ “Gag” Clauses

Many states are moving to block “gag” clauses that prevent pharmacists from telling customers that they could save money by paying cash for prescriptions rather than going through the PBMs and using their health insurance.4 “According to the National Conference of State Legislatures, since 2016, 22 states have enacted legislation prohibiting PBM ‘gag clauses’ with at least 40 legislatures that have considered the prohibition. But of those 22, 18 states have passed law prohibiting the ‘gag clauses’ in 2018.”3

Other legislative or regulatory actions related to PBMs considered by states across the country in 2018 included3:

  • Disclosure reports
  • Studies of prescription drug costs
  • Maximum allowable cost lists
  • Prohibiting PBMs from setting accreditation standards
  • PBM retention of drug rebates
  • PBM reimbursement reporting
  • Audit restrictions.

The National Academy for State Health Policy (NASHP) is a nonpartisan forum of policymakers throughout state governments. Recognizing the growing interest in control of PBMs, NASHP has developed model legislation to assist states in setting local policy regarding PBMs. Some of the reasons cited for the state scrutiny of PBM practices include findings that some PBMs have5:

  • Designed drug formularies that benefit the PBM at the expense of consumers
  • Required consumers to purchase drugs only from PBM-controlled pharmacies
  • Restricted how much prices and cost information pharmacies can share with consumers
  • Failed to act as the fiduciary and safeguard the financial interest of their health plan customers.

Implications for Oncology Practices

These state laws adding restrictions on PBMs and their actions on pharmacists are of interest to oncologists, because it would be logical to seek to extend those pharmacist protections to dispensing physicians. Once a state has taken licensing or registration actions regarding PBMs, it should make it easier for affected groups of pharmacists or physicians to challenge aggressive or inappropriate PBM activities.

The Community Oncology Alliance has created a separate website ( to track the growing dominance of and abuses by PBMs on the access, quality, and transparency of healthcare. This website provides an overview of areas where PBM policy raises concerns for physicians and patients, tracks news and legislative initiatives about PBM restrictions and real-world examples of where PBM policies and practice have adversely affected healthcare, and provides resources to oncology practices for advocacy and reporting their own concerns.

PBMs are now being squeezed by their own health plan and employer customers, by pharmacists, by physicians affected by their policies, by states, and even by their own patients. The value of the PBM as the middleman for general pharmacy and oncology-related pharmacy, as well as the medical benefit aspects of oncology care, has been under constant and growing challenges in 2018 and likely will be in the foreseeable future.

If your group and its patients have been adversely affected by PBM policies and control, this is the time to raise your voice. You may be in a state that is already increasingly receptive to concerns about PBM abuses of power, or you may be able to join resources with others to raise your concerns.

The most effective care for patients with cancer does not involve or require the use of middlemen, such as PBMs. We are fortunate that a perfect storm now seems to be swirling around these middlemen. We may be able to challenge the control that does not make any sense or bring any value to patients.


  1. General Assembly of Maryland. Pharmacy benefits managers. 2018 Regular Session legislation search. Accessed August 16, 2018.
  2. U.S. News & World Report. Arkansas governor signs pharmacy manager bill into law. March 15, 2018.­pharmacy-manager-bill-into-law. Accessed August 16, 2018.
  3. Sullivan T. Pharmacy benefit managers: states put the middlemen on the run – passing multiple laws in 2018. Policy & Medicine. June 28, 2018. Accessed August 16, 2018.
  4. Pear R. Why your pharmacist can’t tell you that $20 prescription could cost only $8. New York Times. February 24, 2018.­clauses.html. Accessed August 16, 2018.
  5. Horvath J. Pharmacy benefit manager model legislation: questions and answers. National Academy for State Health Policy. August 9, 2018.­legislation-questions-and-answers/. Accessed August 16, 2018.

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