Negotiating with PBMs for lower drug prices: New 'aggressive' playbook for employers

A new publication by an association of health services purchasers pulls in punches in its condemnation of the practices of the major pharmacy benefit management organizations.

“A Playbook for Employers: Addressing Pharmacy Benefit Management Misalignment” outlines in red pen the self-dealing of the Big 3 PBMs (Express Scripts, CVS Caremark, and Optum Rx). This has been done before. But the playbook, published by the National Alliance of Healthcare Purchaser Coalitions, goes several steps further.

It offers plan sponsors–particularly self-funded ones–checklists and strategies for outing the PBMs’ unsavory ways of extracting money from drugs. And, to prove the seriousness of its intent, the alliance reminds the sponsors on their obligations as fiduciaries to provide the best possible health coverage for plan members at the lowest cost. In short, if you don’t take these guys on, you could be legally liable.

The playbook launches with a detailed description of the wrongdoings of the Big 3. (The authors note that there are decent PBMs operating in the marketplace but their market share is so slim that they have little influence on the overall gouging trends.) While they purport to be providing pharmacy products to plan members at the best prices, in fact, the playbook asserts, they have created an elaborate web of insider deals that enrich themselves and their partners while passing the cost on to the plan sponsor.

Examples abound:

• Failure to provide generic or similar drugs because the branded drugs are more expensive and deliver higher profits to the PBMs and their various related entities.
• “Rebates” that turn out to raise rather than lower costs to the plan sponsor and members.
• Closed systems that prohibit plan members from seeking cheaper drugs of equal value from other sources.
• Egregious contracts that lock in said abuses for years at a time.

The playbook departs from earlier attacks on PBMs by offering lists of actions plan sponsors and their advisors can take to offset the misalignment of interests. Start with your own benefits advisor, the playbook counsels. Do they actually represent your financial and health coverage goals–or are they in league with the PBMs, even if only through ignorance. An informed, aligned advisor can deliver major cost savings by challenging the current PBM stranglehold. But how do you know?

Related: PBMs, the brokers who control drug prices, finally get Washington’s attention

The playbook presents these “Advisor Selection Considerations”:

• Your advisor should be a “buyer’s agent” who receives “no direct or indirect compensation from PBMs.”
• Your advisor should demonstrate competency with a “demonstrated knowledge of ‘games being played’ by PBMs.
• Your advisor should be committed to transparency with a “contractual obligation to disclose and explain all PBM practices that lead to self-dealing or misalignment.”

And so on.

The playbook includes sections devoted to “Purchaser Strategic Recommendations,” *PBM Principles for Contracting and Governance,” “Medical Drugs: Cost-Savings Opportunities” – all with detailed strategies for drilling down to the ways the PBMs currently manipulate the system to their advantage.

Michael Thompson, National Alliance president and CEO, allows that the playbook is an aggressive blueprint for plan sponsors, many of whom are ill-equipped to fully implement such an aggressive strategy.

“The publishing of the PBM Playbook will not change the market overnight. But it will have an immediate impact,” he says. “We fully expect that employers across the country will read it and share it with their advisors.”

Sponsors can expect pushback from their current benefits advisors for a variety of reasons, he says.

“Some of those advisors will discount the insights from the Playbook and, frankly, that may be a sign to look for a new advisor. Most advisors will take a critical look at their own approach in light of these higher expectations. If even a meaningful percentage (20-25%) of RFP bidders incorporate the recommendations of the Playbook, it will get the attention of the large PBMs,” he says.

Meantime, the other PBMs in the marketplace could benefit from the playbook’s impact.

“Smaller PBMs will use the resource to better sell and stress their differences with the backing of trusted source of truth. When the larger PBMs ‘just say no’ (e.g., to contract language that requires them to act in the best interest of the purchasers), purchasers will be at a moment of truth – if enough act (move away), it will change the market dynamics forever,” he says.

Meantime, he warns, the time is coming when plan sponsors may face repercussions for failing to address this misalignment of interests.

“As fiduciaries, employers have a responsibility to challenge industry misalignment and self-dealing, and this playbook offers strategies to contract for and build a more trustworthy, responsible and sustainable marketplace,” Thompson says. “With health plans and PBMs increasingly owning each other and the growing side deal payment arrangements to consultants and brokers, this is a classic case of the ‘fox guarding the hen house’.”

But plan sponsors should not have to be forced to take actions that benefit their employees. Rather, they should see this as an opportunity to learn more about how the benefits industry operates–and use that information to their advantage.

“As the veil continues to be lifted and employers learn more about how the misaligned industry actually works, they must rethink their strategies,” said Russell Dubose, vice president of Human Resources for Phifer, Inc. and a member of the National Alliance’s National Health Purchaser Leadership Council. “This is an excellent resource to educate key stakeholders and use with advisers to overcome market failings.”