Pharmacy benefit managers, version 2.0 (post J&J lawsuit)

Everyone seems to want to kill the pharmacy benefit managers, but the PBMs exist for a reason.

Prescryptive Health is an example of one of the new generation of companies that are trying to help health insurers and self-funded employer health plans manage their prescription benefits programs without making money through secret or bewildering side deals.

The company aims to use blockchain technology, artificial intelligence and other technology to provide a fast, transparent alternative to traditional PBMs. The company is one of the PBMs supporting the concept of PBMs acting as fiduciaries, or companies that meet formal legal standards for putting the customers’ interests first.

Rae McMahan is in the middle of the gladiator pit.

She has been the senior vice president for payor solutions at Prescryptive since 2022.

Before then, she worked in pharmacy benefits management in specialty drug units at Walgreens, Aetna and Prime Therapeutics. She’s spent years in the rooms where negotiators decide which drugs make it onto health plans’ “formularies,” or lists of covered drugs.

She recently answered questions, via email, about fiduciary PBMs, how the big PBMs are evolving and the new GLP-1 agonist anti-obesity drugs.

The interview has been edited.

How aware of the fiduciary PBM concept do employers, benefits brokers and benefits consultants seem to be?

RAE MCMAHAN: It’s a hot topic.

I don’t think most brokers and consultants were even thinking of it until the J&J lawsuit came out and now, subsequently, the Wells Fargo lawsuit.

It’s tough, because, in an integrated model between the PBM and the health plan insurer, there are offsets between the pharmacy benefit and the medical benefit, and now there’s greater visibility around that.

Now employers know that legacy PBMs are making a lot of money on certain drugs and not making any on others.

Related: Why the PBM industry faces a very different future 

So, that raises more questions: What happens to the dollars on a rebate? Are those provided? Are those not provided? How do we think about availability of drugs from a mail order or from a cash perspective? It’s like this perfect storm on how we’ve evolved and what this really means for the pharmacy benefits industry.

When I’m talking to very large companies, their statement is not if we are going to get sued; it’s when we’re going to and how do we handle it? This is an opportunity to look into the fiduciary concept more from an employer perspective.

We’ve heard publicly from other PBMs that they allow the employers to choose, and give choice to the brokers and consultants, so that the employer can be a fiduciary with other options.

But that’s fraught with challenges, and you don’t generally see the face value of being a fiduciary on the spreadsheet.

There are new models that are coming out around more transparent pricing, and employers and brokers should dig into those as well.

How do you expect to see self-funded plan funding approaches change in 2025 and 2026?

2025 and 2026, they’re right around the corner, and many employers are making changes now for 2025 or are anticipating changes for 2026, given a lot of the media attention around the lawsuits, prescription prices, the conversation around being a fiduciary, etc.

It’s really a pivotal time for pharmacy benefits.

I predict that change is coming, in plan design, biosimilars, and generic drugs.

What I’m already seeing is employers changing their plan design. They’re changing their approach with what they’re going to offer to their employees and their dependents.

I believe the work we’re doing with a direct pharmaceutical marketplace, providing direct access between employers and drug manufacturers on the cost of a drug, will allow for true transparency around price and the adjudication of a net price, and will greatly help take out the complicated nature of pharmacy benefits and usher in a new era.

The legacy system is complicated, and, as we work to eliminate that and get to a net price, that will be a key opportunity for self-funded employers.

On the horizon, we have many more biosimilars coming to market in the specialty space, and we need to help employers make changes to access these biosimilars earlier and often.

We can’t wait a year to get to the lowest-cost product.

For example, with biosimilars for drugs that were used in the autoimmune space for rheumatoid arthritis, we see employers saving around $2,500 per month, and we see patients saving on their co-pays or co-shares every month.

We also see so many cash cards in-market and generics available at very low prices.

I think there’s a potential opportunity in the future to not cover generics and some brand drugs at all via benefits, as many OTCs can just be paid for via the patients’ health savings or flexible spending accounts.

The conversation becomes, how do we incentivize patients to utilize the cash option? Generics are generally a profit center, but there’re other lower-cost options, and I think utilizing these and getting a cash price might be something that self-funded employers would look further at as consumers get more educated on the varying prices of drugs and ways to pay for them.

The specialty drug space is a big area of opportunity — many coupons are provided and relied upon, and there are even direct prices to patients that manufacturers are setting up when a benefit does not provide coverage.

As we all know, specialty accounts for over 50% of the pharmacy benefit spend but only affects 1% to 2% of members, and we see this spend area increasing with the pipeline of new products coming.

The pharmacy ecosystem needs to make sure the right patients are able to access these drugs at a price that our employers can afford.

How are the prices the big PBMs are quoting evolving, and how do the prices they’re negotiating compare with what the new players offer?

The big PBMs have come out with different pricing models.

We even heard them quoted in the House committee hearings about their transparent approach around pricing, and how they’re updating their network agreements accordingly and now offering options: “Do you want spread pricing, or do you want this transparent pass-through pricing?”

One thing to keep in mind is the PBM is still making significant profit at the expense of employers and patients, whether it’s via the group purchasing organization and the dollars that are kept there, manufacturer administrative fees, service fees, set-up costs, etc.

Just remember that the dollars are likely moving somewhere, even in more “transparent” models.

So, when employers are thinking about pricing, I really encourage considering models that might not fit on the current spreadsheet.

What I’m seeing when I’m doing bids with consultants is they’re asking for traditional bids — a straight any-willing-provider discount for a basket of drugs defined, but with the ability to change the basket.

That’s not the future of pharmacy benefits.

To see the future, I really encourage employers to interrogate the spreadsheet.

Spreadsheets are only part of the story.

For example, in the pharmacy benefit bids we’re doing for large employers, we are able to surpass the perceived value of rebates available for employers by moving to a low-net-cost drug, and we are talking to them about how they provide that value at point of sale to a member, with a direct acquisition cost.

We’re able to give them that value at the onset without waiting for a rebate check — but because the model is different, the value doesn’t come across in a traditional PBM financial spreadsheet as a line item to compare to rebate value.

So, employers should look for a per-member-per-month perspective and dive into how much the rebate dollars may increase cost overall for generic, brand, and specialty drugs.

The per-member-per-month view is a much more effective way of looking at what the pharmacy benefit cost is and how it will lower employers’ and employees’ costs overall.

The value comes through when you peel that back further to say, “How does it look for a bottom-line number of what the employer is going to spend? What is the overall drug cost, and what additional fees will the employer have to pay? What is the rebate value, and what are all of the programs around it that may push utilization to higher-cost drugs? How do we utilize coupons as they’re available until we get around needing coupons at all? How do we utilize moving to lower-cost brand alternatives and/or generic alternatives that can save a ton of money?”

You need to really dig into those different levers on what the formulary looks like.

And then how does that translate to the benefit, and then how do your employees know how to access and utilize their benefit to its greatest value. It’s about more than the spreadsheet.

What do you think about the big PBMs’ relationships with their mail-order pharmacies?

When we think about the PBMs and vertical integration, where they also own retail pharmacies, mail order and specialty pharmacies or in some cases all three, we see PBMs set up network pharmacy structures to drive a lower cost for employers to utilize only those owned entities — or, they have a limited network with their own pharmacies as a preferred, with other less preferred options.

In some cases, there are cost and service benefits, and we can imagine that’s partially because more volume is going through their owned pharmacy with additional profitability.

But this limits pharmacy choice and access.

Retail pharmacies now have many options to get the medication to the home just as mail-order pharmacies do and can deliver the same day. Less time than what we would spend going to the retail pharmacies.

We didn’t have all of the logistics and technology to allow this to happen in the past, but that’s no longer the case.

There are entities out there now, like Amazon Pharmacy and others, that can get the medication out within two hours in different regions for a 30-60-90-day supply. That’s leveled the playing field.

Choice for patients is critical, to get the medications they need and feel empowered to do so.

Hopefully, the changes in technology and buying behavior of employers can help to support that goal of the patient having choice and understanding for the medication they need.

How do you see employers approaching GLP-1 agonists for use in the treatment of diabetes and for use in the treatment of obesity now?

I don’t remember the last time there has been so much noise and chatter about a drug or a class of drugs new to market.

GLP-1s are amazing, and we should be appreciative of the research that has gone into them — and how effective they are for people living with obesity.

With 40+% of adults meeting the criteria for using these medications, I think we’re able to acknowledge now that obesity is a disease that we all collectively need to support.

A recent PSG survey  found that more than 90% of plans cover GLP-1 drugs for type 2 diabetes, while just over 30% cover these drugs for obesity.

They are great drugs, but, obviously, they come at a huge expense.

One thing that I think will help with the pricing is the new entrants in the market, in the oral form, plus more production capacity of the current drugs.

Employers need to consider: How do you provide different services — counseling, education — to help curb costs but also treat the whole patient individually?

How do we provide access, but not at the expense of doubling the employers’ benefit costs?

I think we need to show how we can get the drugs covered, but we need to figure out how we get the price lower, and how we make sure that we’re utilizing the most effective drug for the person, because a lot of folks have tried a number of options already in-market without the right support system without success.

What sometimes gets lost in the noise is what the patient experiences and empowering them to make the right choices and understand their costs upfront.

This is where new technologies like digital prescriptions can step in to create that transparency upfront.

David Joyner, the president of CVS Caremark, said at the recent House Oversight PBM hearing that, if every American who needs a GLP-1 agonist took one at current prices, that would cost $1.2 trillion per year and be unsustainable. What do you think about that prediction?

We see that, if we’re going to pay for GLP-1s for all of the folks that would meet the criteria for them, I think our overall health care expense will double, and that’s just not feasible at this point in time.

How will employers pay for these drugs at this access and over the long term? This generally means they will have to raise their prices for goods and or services, and that is not feasible either.

We need to be thinking about the patient and how they navigate access to these drugs.

It’s a complicated process, and employers do have the ability to empower patients in making decisions so that they can understand at the point of prescribing with their physician, what drugs they do have access to, how much they will cost for one fill and longer term, where they’re covered in their employer benefits, what pharmacy they can go to and/or what a cash price might be.

The individualized patient workflow is so important on these drugs, and employers may not realize it, but there are tools now that they can use to help guide their employees through the process and help them get the best drug for them.

With these specific drugs, because there’s so much noise and popularity out in the media and attention around these and obviously the cost, they’re not cheap.

So employers have to make sure they work hard on providing visibility for their benefits in this space on what is covered and not covered — and that includes patient support and empowerment.

How do you think typical brokers could improve the advice they’re giving employers about GLP-1s?

This is tough, because there’s so many different companies out there that offer a center of excellence or point solution (as they are often referenced), and each one is different in their approach on coverage, utilization, counseling programs, prescribing physicians, therapy protocols, etc.

It’s really hard to make a decision around what is the best approach.

And to my earlier point: This is a disease that many people have lived with for quite some time. So it’s a long-term decision likely.

The golden question is, how much can we afford?

One thing we want to avoid is to utilize a specific specialty pharmacy that’s vertically integrated within the legacy PBM system without the proper, unbiased, thorough clinical management.

The PBMs have been known for making a lot of money via drug price margins on increased use of specialty pharmaceuticals without the proper utilization management reviews in place.

We need to make sure that we have something that the patients are really benefiting from.

Imagine these drugs working for our population, and we lower the rate of people with obesity. That would protect our system overall from a lot of the downstream diseases and expense that happen from people having this as a foundational disease.