The Challenges Continue for PBMs: Are They Headed for a Perfect Storm?

Dawn Holcombe, MBA, FACMPE, ACHE
Editor-in-Chief
President, DGH Consulting, South Windsor, CT

Pharmacy benefit managers (PBMs) have become a fixture in the drug supply chain. They serve as administrators of prescription drug benefits for those who pay for care, including commercial health plans, self-insured employer plans, Medicare Part D plans, and state government employee plans. According to the Pharmaceutical Care Management Association (PCMA), PBMs administer prescription drug plans for more than 266 million Americans.1 The 3 largest PBM companies, Express Scripts (acquired by Cigna), OptumRx (owned by United Healthcare), and CVS Caremark (owned by CVS Health, which also owns Aetna), process 85% of all prescription claims.2 Because these 3 companies have close ties with other large payers in healthcare, they wield significant influence over physicians and patients. In recent years, PBMs have been affecting an increasing number of oral oncology agents, and thus, patients with cancer.

Pushback from the Oncology Community

The oncology community is voicing rising concerns regarding the role of PBMs in cancer treatment; specifically the way in which they may threaten access to high-quality care and increase the financial and administrative burden of providers and patients. In 2018, the American Society of Clinical Oncology (ASCO) published a position statement noting that PBM practices, while designed to help control costs in healthcare, may actually compromise physicians’ ability to provide proper and timely treatment due to delays, dispensing errors, alterations to treatment doses (without consulting oncology care providers), duplicate copays, and drug waste.3 ASCO was encouraged when the Centers for Medicare & Medicaid Services appeared to add provisions devaluing the measurement and use of PBM collection of direct and indirect remuneration (DIR) fees in its Contract Year 2021 and 2022 Medicare Advantage and Part D Proposed Rules, which had been called for in the position statement.

Since 2017, the Community Oncology Alliance (COA) has led a campaign against PBMs, publishing 5 volumes of Pharmacy Benefit Manager Horror Stories and the negative impact of PBM intrusion on patients with cancer and their providers. The COA has advocated with, and provided legal support to, practices across the country that are battling PBM practices, such as the application of DIR fees using non-oncology measurements against oncology practices. The National Oncology State Network supports PBM reform initiatives in member states and continues to raise awareness of common impact points for its members to use in their own states regarding PBM issues. However, the oncology community is not the only healthcare sector pushing back against punitive practices.

Pushback from the Pharmacy Community

The National Community Pharmacists Association (NCPA), which represents the voice of more than 21,000 independent pharmacies, is part of the active pushback against PBMs and their practices. As a strong advocate nationwide, this organization tracks and supports state legislation to address concerns related to PBMs and their impact on the pharmacy model. The NCPA’s resources and information complement some of the work being done in the oncology community related to information sheets, model legislative language, and the tracking of legislative development and wins. The NCPA Advocacy Center tracks 2021 PBM Reform Legislation for every state on its website.

Customers Are Questioning PBM Practices

Health plans, self-funded employers (which include provider groups and health systems), and brokers who serve as contracting intermediaries are questioning the role that PBMs play as a financial “middleman” for rebates. There are 2 common one-sided contract terms frequently found in customer contracts with PBMs that were called out in April 2021 in professional resources for brokers, self-funded employers, and plan sponsors. PBM contracts typically include arrangements for handling manufacturer rebates that seem to be appropriate for the broker or plan and are now being exposed as significant potential windfall opportunities for the PBM at the expense of the broker, employer, or plan.

The first is a fixed-rebate model, in which PBMs guarantee a fixed-dollar amount per brand drug claim regardless of the amount they collect. Under this model, if and when the PBMs collect higher rebates driven by drug volume, they keep the overage. To the extent that PBMs dictate, deny, or influence patient or prescriber behavior to raise drug volumes and their profits, all entities (with the exception of the PBMs) are adversely affected.

The second rebate model may appear to provide as much as 100% of earned drug rebates on a pass-through basis to their customers (ie, the broker, employer, or plan), but often PBMs have created subsidiaries that purport to aggregate rebates for ease of processing, while in actuality retaining significant chunks of manufacturer rebates in service fees. The PBMs will disclose to their customers low net collected “pass-through” rebates while retaining most rebate revenues (collected as “service fees”) in their own aggregator subsidiaries.

Employer groups and plans are raising their audit activities, questioning contract terms, and sharing information on opaque and suspicious PBM practices and contract clauses.4 As providers and employers ourselves, we can also participate in those activities, contributing to the reform of PBM practices from the customer perspective rather than waiting to react solely to downstream PBM prescription drug management practices.

Recent Landmark Ruling

On December 10, 2020, the US Supreme Court made a unanimous ruling against the PCMA, which represents the 11 largest PBMs in the country. This ruling upholds Act 900, a law passed by the Arkansas legislature in 2015, which effectively requires PBMs to reimburse Arkansas pharmacies at a price equal to or higher than the pharmacy’s wholesale cost. This act also allows these pharmacies to refuse to sell a drug if the reimbursement rate is lower than their acquisition cost.5 This was one of the most anticipated rulings in the pharmacy world because it established that states do have the right to enact laws that regulate PBM reimbursement costs to pharmacies. It clears the way for states to pass laws that protect pharmacies (and physicians if we are diligent in asking) from predatory reimbursement practices by PBMs.6

What You Can Do

Remaining aware of the challenges at hand and the work being done on your behalf by professional societies, affiliates, and advocates is the first step in protecting yourself, your colleagues, and your customers. The phrase, “If you see something, say something” now applies to PBM practices. Fortunately, we have advocates and legal professionals who can help us remedy and reign in ongoing threats to patient care, access, and affordability. When you are asked about adverse PBM practices, it is important to respond quickly and with as much information as possible.

If we continue to work together, common sense and reasonable practices can prevail. If you have questions or concerns, or need further information on this important topic, feel free to reach out to me directly at This email address is being protected from spambots. You need JavaScript enabled to view it..

References

  1. Pharmaceutical Care Management Association. The value of PBMs. www.pcmanet.org/the-value-of-pbms/. Accessed June 1, 2021.
  2. Dearment A. PBM practices harm care for cancer patients, oncology professional group says. September 3, 2018. https://medcitynews.com/2018/09/pbm-practices-harm-care-for-cancer-patients-oncology-professional-group-says/. Accessed June 1, 2021.
  3. American Society of Clinical Oncology. American Society of Clinical Oncology position statement: Pharmacy Benefit Managers and their impact on cancer care. August 2018. www.asco.org/sites/new-www.asco.org/files/content-files/advocacy-and-policy/ASCO-Position-Statement-PBMs-Aug.-2018.pdf?et_cid=40510620&et_rid=1760459169&linkid=the+statement. Accessed June 1, 2021.
  4. Levitt JE, Lee DY. Cautionary tale: plan sponsors losing manufacturer rebate dollars to PBMs through rebate aggregators. April 15, 2021. www.benefitspro.com/2021/04/15/cautionary-tale-plan-sponsors-losing-manufacturer-rebate-dollars-to-pbms-through-rebate-aggregators/?slreturn=20210502103011. Accessed June 1, 2021.
  5. Rutledge v Pharmaceutical Care Management Association, 592 U.S. (2020).
  6. Baird JS, Greenwood CD. Landmark Supreme Court ruling: state regulation of PBM reimbursement rates. December 14, 2020. www.pharmacytimes.com/view/landmark-supreme-court-ruling-state-regulation-of-pbm-reimbursement-rates. Accessed June 1, 2021.

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