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Pharmacy benefits management companies. The right ones may be one of your best defenses against employer medical costs that, according to the latest annual PricewaterhouseCoopers report, are projected to rise 6.5% in 2022.

There’s hardly any mystery behind the reason for these rising costs: After having deferred medical care during the COVID-19 pandemic, more of us are expected to finally seek routine care and even elective surgeries in 2022. That, of course, would be the primary culprit. We can also blame the unrelenting opioid and mental health crises, as well as the lack of exercise, poor eating habits and increases in substance abuse seen during the pandemic.

So, what to do? How to treat what some have come to call the “COVID-19 hangover?”

Pharmacy benefits management companies. The right ones may be one of your best defenses against employer medical costs that, according to the latest annual PricewaterhouseCoopers report, are projected to rise 6.5% in 2022.

One of the smarter strategies to reduce health plan costs has long rested in better management of drug spending. But in a world filled with pharmacy benefits management companies – including a few under investigation by the authorities – the trick is finding the right one.

Pharmacy benefits managers aren’t new to the healthcare scene. In fact, they’ve been around for decades. PBMs like Express Scripts, CVS Caremark and OptumRx administer prescription drug programs for more than 230 million Americans, helping negotiate rates with drug makers, running drug mail-order businesses and processing Rx claims.

The idea is to save everyone money, which PBMs, in fact, sometimes do. But not always, not consistently, not in ways that make us feel we're getting treated right.

A Credibility Issue

PBMs have been accused of pocketing manufacturers’ rebates rather than passing them along to patients.

Some also have been known to collect and hold onto the difference between patient copays and the cost of a drug. (The USC Center for Health Policy and Economics found that insurance copays for prescriptions are higher than the cost of the drug 25 percent of the time.)

PBMs also have a reputation for being extremely opaque about pricing, clouding the data that employers (and their health plan members) need to understand why certain drugs cost as much as they do.

All of this has drawn the attention of regulators and lawmakers. Several states have already passed legislation regarding the licensure of PBMs, rebate transparency, and fees.

Their credibility under fire, some PBMs have tried to make amends.

They have increasingly turned to touting themselves as “transparent” or “pass-through PBMs,” vowing, among other reforms, to pass along 100% of any drug maker rebates and discounts they receive in favor of a flat administrative fee.

Another important change? These new PBMs will now share with doctors (and their patients) real-time data so that they can opt for a lower-cost drug when available, rather than leaving everyone and their health plans to pay for the higher-priced option.

The Promise of Big Cost-Savings

These changes in the way they run their business now allows these PBMs to win over clients by trumpeting significant, and sometime eye-popping, savings.

Imagine 30% savings in the first year. Or reducing your per-employee, per-month cost by a third or better. Or cutting claims costs by 20%.

It all sounds great, right?

Now try finding the right PBM. At last count, there were 70 PBMs active in the marketplace, with about 10 new ones popping up in the past couple of years. That may not sound like a big number, but it’s definitely large enough to wonder about the possibility of making the wrong pick. (Yes, we can help with that.)

In the meantime, new, smaller PBMs are springing up. Their approach is based on transparency first, vowing to avoid the practices that have earned the industry so much negative press and scrutiny.

That’s promising – as is their early success among employers disillusioned with the old way of doing business. Not every company may be ready to leap into the arms of a PBM built on the pass-through model. But it’s not hard to see that their approach is exactly where the entire industry needs to go.

The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the nation. For more information about group health plans, contact us online or call 480-730-4920.


This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.

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