For employers looking for guidance on navigating contracts with pharmacy benefit managers (PBMs), there are a variety of resources available; but you have to be cautious about who's supplying the information.
URAC (the Utilization Review Accreditation Commission) is responsible for granting accreditation for a variety of health care organizations, including PBMs. Their set of criteria is designed so that consumers and employers can trust that a provider meets universal requirements for fair business practices. However, the group is not immune to the size and influence of the PBM industry.
Not surprisingly then, URACs "PBM Purchasers Guide: A Quality Management Toolkit" offers some misleading information and neglects some of the more troubling aspects of PBM behavior.
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Their explanation for "spread pricing" — or the difference between what a PBM pays a pharmacy to dispense a medication and what it charges the employer to cover that medicine — claims positive incentives as one of its selling points. They write: "Allowing spread pricing provides incentives for the PBM to negotiate aggressively with the network providers. It also allows the PBM to offer a better price in the areas where the plan sponsor demands price competition."
However, in practice, the incentive that this arrangement really produces is a markup of costs for employers so that the PBM can increase the spread, or their own profits. Recently we've seen reports of large-scale employers discovering how much money they were truly losing under their PBM contracts. The City of Houston found that it was overcharged $3.7 million by Cigna, while Meridian Health Systems, Inc. saw its benefits bills increase by $1.3 million under their contract with Express Scripts.
While URAC briefly notes that this is a possibility in PBM contracts, their solution for employers is a misleading simplification — they only advise that an employer include safeguards in their contracts to ensure transparency. What this advice neglects is that many large PBMS have worked tirelessly to ensure that contracts are confusing, riddled with industry jargon, and provide ample space for them to continue their spread pricing tactics and maintain record profits. All of this is at the expense of the employer and consumer.
What is actually needed to navigate benefits contracts is an explanation of industry jargon and topics common in PBM contracts that are vague and confusing. By recognizing where a large PBM can create opportunities for spread pricing trickery, an employer can ensure they are receiving a fair contract.
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