Yesterday an article appeared in my bi-weekly newsletter which outlined how non-fiduciary PBMs make money in the back-end
through a little known hidden cash flow tactic called back-billing. The article must have hit a nerve because I received quite a bit of feedback. One email I received in particular stood out. I’ll get to that later.
A couple of days ago I spent an hour talking with a seasoned consultant about how guaranteed AWP discounts aren’t in their clients best interest. Sure, guaranteed discounts are better than nothing but even better are plan sponsors paying actual pharmacy reimbursement (APR) which in turn makes AWP discounts ineffectual. He didn’t buy it!
|Unsolicited email depicting back-billing case (click to enlarge)
Take a look at what Caterpillar Inc. is doing particularly the part about “it decided to determine its own pricing methodologies in contracts rather than using PBM-negotiated drug prices.” Discounts off AWP are a distraction used by non-fiduciary PBMs to perpetuate the opacity in their dealings. Caterpillar learned this a decade ago and is likely using a pricing methodology closely resembling APR.
Because it is shifting costs or service fees to the back-end, a non-fiduciary PBM will often come in at a lower price on the front-end (claims repricing and adjudication). I know what you’re thinking – sour grapes. Trust me it’s not I just don’t like to see people taken advantage of. But, if I try to help and you ignore it then you know how the saying goes, “fool me once…”
This brings me to the point of this post and I’m quoting a peer Lisa Gish who wrote to me recently, “can’t seem to shake my displeasure with the lack of forward thinking consultants who are absolutely stuck in old mindsets and tactics.” Nuff said now about that email I received.
I must admit part of the reason I’m sharing this email, albeit redacted, is because I too am frustrated by consultants and self-insured employers who evaluate claims repricings but don’t take into consideration hidden costs especially those in the back-end. What good are transparent, fiduciary or pass-through agreements if plan sponsors and their advisers aren’t sophisticated enough to verify if they are actually receiving it?
In conclusion, PBMs accepting a fiduciary responsibility is meaningless if plan sponsors and their advisers aren’t sophisticated enough to uncover hidden cash flows generated by non-fiduciary PBMs. The costs will almost always appear to be lower from the latter. Don’t take my word for it click on the image above and see for yourself. I redacted the PBM’s name but just know it is one of the big five.