PBM Reform: Changes on the horizon for employer drug plans: soothing balm or bitter pill?
During its 2024 session, Congress came close to passing a series of pharmacy benefits manager (PBM) reforms, which are very likely to resurface in the next legislative session. If enacted, they could bring transformational changes to how PBMs do business. Indeed, while those changes could significantly impact drug benefits planning and prescription prices, the extent – and direction – of that impact is still very much uncertain. What we do know is that changes are likely coming, and to leverage any advantages, or weather any challenges, starts with understanding the implications so you can partner with your HR team to make important benefits planning decisions.
Spending on prescription drugs surged by 9.9% in 2023 and remains the fastest-growing health benefit cost.1 In fact, PwC’s Health Research Institute (HRI) projects pharmacy benefits costs will climb another 8% or more this year. 2 The status quo is simply not sustainable.
However, even well-meaning reform proposals can have unforeseen impacts. We take a closer look at the PBM reforms under consideration to evaluate their potential gains for pharmacy leaders navigating benefits planning for their health systems, as well as potential unintended “side effects.”
What Pharmacy Leaders Should Know About Major PBM Reform Proposals: Pros and Cons
• Transparency and disclosure requirements: One provision in last year’s Senate package would require PBMs to provide detailed data on drug spending to their benefits plan customers. This would give hospitals better line-of-sight into what they are paying and why – fees, discounts, rebates, etc. But transparency per se doesn’t necessarily mean lower costs if those practices still remain the norm – and some PBMs may look to shift cost elsewhere.
• 100% rebate pass throughs: Another provision in the measure would compel passing along 100% of drugmaker rebates and discounts to the benefits plan. While this could reduce costs for self-funded hospitals and health systems, it might provide the PBMs with less incentive to negotiate aggressively with the manufacturers.
• Banning “spread pricing”: This occurs when a PBM charges a plan more for a prescription than it pays the pharmacy and pockets the difference. While banning the practice would let plans pay the actual cost of the drug, it could cause greater volatility by eliminating one way that PBMs currently manage risk and smooth costs for employers.
• Ending “steering”: That’s when a PBM works to channel prescriptions to its own wholly owned or affiliated retail, mail-order, or specialty pharmacies, either through a higher co-pay if the patient goes elsewhere, or an outright refusal to fill. Barring the practice would allow employers to use any willing provider, and plan members to go wherever convenient. While that could prevent customer losses to larger chain pharmacies and give your members more options to fill their prescriptions, including onsite hospital pharmacies, broader networks can also result in higher costs.
• Requiring “point-of-sale rebates”: A “point-of-sale rebate” occurs when the value of a rebate, instead of going to the plan, goes directly to offset an individual patient’s cost-share for that drug. While that would especially benefit those plan members who take high-cost medications, it would limit the plan sponsor’s ability to use rebates to lower plan costs and premiums for all participants – or even force it to increase premiums or reduce overall benefits.
Clearly, PBM reform is not a clear-cut exercise. Nor is it a panacea for a system fraught with escalating and complex financials. Big pharma reform is equally critical to making medications more affordable and accessible for all patients. We need a balanced, multi-pronged commitment to reform that chases a more noble purpose than dollars.
