What benefits advisors need to know about PBM reform

Pharmacy benefits managers (PBMs) have become integral to the health care industry in the U.S., gradually cementing a position as an intermediary among pharmacies, insurance companies, and drug manufacturers. 

Why should benefits advisors and brokers care about this?

Brokers should care because recent Congressional efforts to reform PBM practices could change pricing structures and affect the cost of prescription drugs for employees and the cost of plans for employers. As a result, PMB reform gives brokers another opportunity to act as trusted advisors to employers — another opportunity to enhance their relationships with existing clients and deepen their conversations with prospective clients.

More to the point, advisors would be well-served to leverage their knowledge and experience to help ensure that HR departments are compliant with regulations, get the most value from their benefits spend, and create strategies for managing PBM reform-related costs.

A little background

PBMs process prescription claims, manage drug formularies, negotiate drug prices, and provide drug utilization review services, all to ensure patient safety and cost savings. They were designed to help individuals access prescription drugs when they need them and to do so at affordable prices. At least that was the plan. 

Critics argue that PBMs have actually increased health care costs, limited patient choice, and failed to pass discounts on to consumers. While PBMs have continued to grow and consolidate their power within the health care industry, they’ve attracted the attention of policymakers, consumer advocates, and health care providers who have raised concerns about PBMs’ business practices. More recently, the effectiveness and practices of PBMs have come under close and often harsh scrutiny by lawmakers on both sides of the aisle, as well as independents, resulting in several federal and state legislative proposals aimed at reforming PBMs.

What’s on the table

As recently as the week of May 8, four new bills related to PBM reforms moved out of the U.S. Senate Health, Education, Labor and Pensions Committee. This followed passage of five bipartisan bills out of the Senate Judiciary Committee in February. 

All of the bills that have advanced in Congress share one overarching objective: increased transparency into the opaque practices of PBMs.

The various bills have unique wrinkles. But the Pharmacy Benefit Manager Reform Act (S. 1339), led by Senators Bernie Sanders (I-VT) and Bill Cassidy (R-LA), contains three reforms that reflect the sentiments of almost every one of the bills: ban spread pricing, ban certain claw backs by PBMs, and require rebates paid to PBMs be passed through to plan sponsors.

Why should brokers care about this seemingly arcane legal mumbo-jumbo? Before answering that question, let’s first look at what those three reforms mean: 

• Spread pricing — A PBM charges health plans more than it pays the pharmacy for a medication and then pockets the “spread,” or difference in costs.
• Rebates — These are payments from drug manufacturers to PBMs in exchange for the PBM giving their products preferred status and greater market share on the plan formularies.
• Clawbacks — These are remuneration fees — direct and indirect — incurred by pharmacies that dispense Medicare Part D (outpatient) drugs. PBMs can charge these fees long after a pharmacy has filled a Medicare prescription.

The value brokers can bring to the equation 

As key players in the health care industry, advisors can deliver valuable guidance to their clients on employee benefits, insurance, and health care services. With the proposed legislation for PBM reform, benefits brokers would be well served to be fully aware of the changes, be able to explain how they might affect their clients, and in the best-case scenario, be prepared to offer recommendations for plan changes and employee communication.

For example, the proposed PBM reforms could ultimately impact employees’ access to prescription drugs. The PDRRA’s requirement that PBMs report all rebates and pass them on to plan sponsors or patients could result in lower drug prices for employees. On the other hand, the increased transparency and competition in the market could lead to higher costs for PBMs, which could ultimately be passed on to employers.

Benefits advisors can play a pivotal role in educating their clients about these sorts of outcomes and how they might affect their benefits packages. Brokers can also continue helping their clients to navigate the complex world of health care and insurance by providing guidance on selecting the right insurance plans, negotiating drug prices with PBMs, and managing drug formularies.

Six ways brokers can help

1. Communicate regularly

Advisors should communicate regularly with their clients about the changes and how they may impact their benefits packages. Regular communication helps make sure clients are aware of the changes and can make informed decisions about their health care and insurance options.

2. Provide tailored advice

 Brokers can help their clients by providing tailored benefits administration advice that addresses their specific needs, helping employers understand the complex cost structures associated with prescription drugs, and helping negotiate prices with PBMs to ensure their clients are getting the best possible value for their healthcare dollars.

3. Get vendor help for better communication

Brokers can work with benefits administration vendors who have the expertise and strategies to help employers communicate changes to their workforce and company leadership.

4. Help clients analyze their current plan utilization and pricing

By understanding the health care trends in their region, brokers can advise HR leaders on the best strategies for containing costs and ensuring employees are getting the most value from their health plans. This data is particularly important as PBM reform continues to evolve and create new challenges for HR departments.

5. Provide ongoing compliance support

As new PBM regulations and laws emerge, HR leaders must stay informed of the latest requirements. Benefits brokers can provide an understanding of these regulations and help ensure that HR leaders take the necessary steps to remain compliant.

6. Help clients evaluate their existing pharmaceutical and PBM contracts

Brokers are in the perfect position to identify areas for improvement within their clients’ existing agreements, helping ensure HR gets the best value for its investment. With a broker’s expertise, employers can negotiate better terms and create strategies for effectively managing PBM reform-related costs.

Although the details of the various bills pushing for PBM reform may be complex, brokers should focus on understanding the impact of these changes on their clients and their employees, and be prepared to be a valuable source of information and guidance to their clients along the way.

Craig Stephens is chief revenue officer for Selerix, a provider of benefits administration solutions for employers and carriers.