Why the PBM industry faces a very different future 

We are living at a time when there is a spirited debate about nearly everything – business, sports, politics, the weather. But, on at least one issue, there is a loud chorus of united voices:  The pharmacy benefit management (PBM) industry desperately needs a new direction. 

PBMs that operate with opaque business practices and antiquated technology stifle innovation and fail to fulfill their promise of lowering drug costs. This is particularly problematic because  three legacy PBMs control 80% of the market.

Until now, the status quo has prevailed. The issues plaguing the pharmacy benefit management market are complex, deeply rooted, intertwined, and difficult to address without risking significant unintended consequences. 

But they can be solved through focused, incremental evolution. And the time may finally be right for payers, providers, and consumers to get the experience they deserve. 

The moment we’ve all been waiting for

The PBM industry is currently experiencing a confluence of technological, regulatory, and marketplace changes. 

The FDA has recently approved staggeringly expensive specialty medications, and while these drugs are only used by a small fraction of any given member population, they can account for the majority of a payer’s total prescription benefit spend. 

The unprecedented demand for GLP-1s as an option for obesity is also sending drug spend skyrocketing. While these medications are effective for weight loss and, subsequently, reduce the risk of comorbidities and other potential health challenges, many payers and employers are still looking for the best approach forcovering these treatments. Some pharmacies have elected to stop carrying these medications due to low reimbursements, which is creating further access issues for members with all sorts of conditions. 

For these cost and access reasons, among others, state and federal policymakers are urgently looking for and enacting ways to reduce drug costs for consumers. To that end, the federal government recently granted itself the power to negotiate pricing for Medicare drugs through the Inflation Reduction Act (IRA). After decades of debate, federal and state policymakers have also loosened rules around drug importation. 

The pharmaceutical industry has fought both of these changes for years, yet the pressure on lawmakers to take action finally overcame the opposition. Several bills were introduced in both the U.S. House and Senate addressing the role of PBMs, and the Federal Trade Commission is currently examining the practices of the largest companies in the industry.

Apart from this pressure on the policy front, the industry’s widespread reliance on antiquated technology is also causing frustration among payers and members. While nearly every other industry has leaned into technological innovations, the largest pharmacy benefit managers still use platforms that have been outdated for decades. 

This has not only stunted innovation and interoperability, but it has also contributed to health care becoming a lightning rod for cyberattacks, endangering patients and creating further frustration with the industry status quo. But, as AI becomes more prevalent and accessible, stakeholders inside and outside of the industry are now in an arms race to create solutions to better serve partners, providers and patients. 

The future we deserve

A few years ago, Jason Borschow, CEO of Abarca, forecasted what the healthcare industry would look like in 2030. Among his predictions was the idea that PBMs would cease to exist as we know them. Instead, they would become deeply integrated into their client’s technology, services, and brand – essentially operating as an extension of their clients. 

In today’s climate, this sort of collaboration may seem impossible, but payers are already putting it into practice. Just last year, a large health plan publicly announced that it would no longer rely on a single PBM, instead choosing to unbundle its PBM services and work with several best-in-class partners to manage individual functions. 

There are many benefits that can be achieved by moving away from the traditional PBM model; chief among them is increasing control and visibility payers have over their pharmacy benefits. They also have the potential to increase access to advanced technology, diversify partners, eliminate conflicts, and share risk.  

In order to succeed in this new ecosystem, PBMs will need to be adaptable and intensely focus on the unique needs, goals and challenges of each client. No one will need to settle for a one-size-fits-all approach to pharmacy benefits. 

Given their position in the industry, PBMs should strive to be seen as connectors rather than roadblocks. The PBMs of the not-so-distant future will also need to embrace innovation and develop advanced tools that facilitate interoperability, engage members, lower costs and improve outcomes. 

Beginning with the end in mind

While pressure from outside of the PBM industry is great, the change that we so badly need must come from within.

We are on the precipice of an evolution that will make health care more seamless and personalized for everyone. But we should not see that as the end of the road, let alone something that can be accomplished overnight. It’s a moving target that will keep us all accountable and will require ongoing collaboration and innovation. 

But this is the least that health care payers and benefit managers expect and deserve.

Javier Gonzalez is Chief Growth & Commercial Officer at Abarca Health.