As pharmacy benefit managers (PBMs) and health plan sponsors face increasing pressure to manage costs without compromising care, one of the most effective strategies is moving J code drugs from medical to pharmacy benefit. This approach can streamline administration, increase transparency, and create more predictable pricing structures for stakeholders. In this blog, we’ll explore the benefits of this transition, and I’ll explain the key differences between HCPCS and NDC codes through a simple table.

Understanding J Code Drugs

J codes are part of the Healthcare Common Procedure Coding System (HCPCS), which healthcare providers use to bill for injectable drugs, chemotherapy, and other treatment medications administered in clinical settings. When billed under the medical benefit, these drugs often come with opaque pricing and limited oversight, making it difficult for plan sponsors to manage costs effectively.

Benefits of Moving J Code Drugs to the Pharmacy Benefit

1. Increased Cost Transparency: Under the medical benefit, drugs billed using J codes tend to come with variable pricing due to fee-for-service models and markups from healthcare providers. In contrast, the pharmacy benefit utilizes National Drug Codes (NDC), which allow for more standardized and transparent pricing, enabling better cost management and forecasting.
2. Better Clinical Management: Pharmacy benefits offer a structured formulary, prior authorization requirements, and utilization management tools that ensure members receive the most appropriate medication. With J code drugs under the pharmacy benefit, plan sponsors can implement these clinical management techniques to control utilization and promote evidence-based medicine.
3. Streamlined Claims Processing: Medical benefit claims often come with delayed payments and higher administrative complexity. By moving these drugs to the pharmacy benefit, plan sponsors can leverage electronic processing, reducing delays and ensuring more accurate reimbursement.
4. Specialty Pharmacy Expertise: Many J code drugs are high-cost specialty medications. When these drugs are shifted to the pharmacy benefit, they can be managed through specialty pharmacies that offer tailored support services like patient education, adherence programs, and risk management.
5. Mitigation of Fraud, Waste, and Abuse: The move from HCPCS to NDC coding allows for more granular data tracking, making it easier to identify potential instances of overbilling, upcoding, or inappropriate use. Pharmacy benefits also have stricter audit protocols, which can help reduce the risk of fraud.

Final Thoughts

Start by analyzing historical claims data for J code drugs under the medical benefit. Identify high-cost drugs, their utilization patterns, and the settings where they are administered (e.g., hospitals, outpatient centers). This will allow you to prioritize which drugs to transition first, focusing on those that offer the greatest potential for cost savings and clinical oversight when moved to the pharmacy benefit.

Moving J code drugs from medical to pharmacy benefit is a practical and strategic move for organizations looking to take control of rising specialty drug costs. Not only does this shift offer better financial transparency, but it also enhances clinical oversight and provides a framework for reducing inefficiencies. By leveraging the advantages of NDC-based drug management, plan sponsors can deliver better outcomes for patients while ensuring a more predictable and manageable cost structure.

Employers seeking to avoid cost-shifting even as expenses continue to rise and other notes from around the interweb:

• Employers seeking to avoid cost-shifting even as expenses continue to rise. As employers face rising costs, many are looking to rethink plan designs rather than emphasize shifting expenses to workers, according to a new WTW report. WTW released its 2024 Best Practices in Healthcare Survey on Thursday, which polled 417 employers representing 6 million workers. It found that these firms are expecting costs to balloon by 7.7% in 2025, compared to an increase of 6.9% in 2024 and 6.5% for 2023. Despite the increase, however, only 34% told WTW that they intend to shift those costs to employees by raising premiums. Twenty percent said they will push high-deductible health plans or account-based coverage to address costs. Instead, 52% said they intend to roll out programs that reduce total costs, and 51% said they would use plan designs and network models to steer workers to lower-cost and higher-quality providers.

• Monopoly Round-Up: Lina Khan, Pharma Middlemen and “Tasty Rebates”. By 2019, Sanofi was giving OptumRx, one of the biggest PBMs, 80% of the list price of Lantus just to be the preferred insulin for its patients. That’s just $64 going to Sanofi for the drug, and $339 going to OptumRx as a refund. Now, you might think that’s not a big deal. I mean, a PBM works for an insurance company, and you would think insurance companies have an incentive to keep pharma prices low. After all, insurance companies take a monthly payment from patients, and then pay for most medical expenses. A drug cost is an expense; therefore they’d like that to be lower. So, you’d imagine that the $339 refund is just a way of lowering the price to the patient. But here’s where it gets nasty.

• Kentucky sues PBM, alleging it had a role in the deadly opioid addiction crisis. The lawsuit Attorney General Russell Coleman filed this week in state court claims St. Louis-based Express Scripts and its affiliated organizations colluded with opioid manufacturers in deceptive marketing schemes to increase sales of the addictive drugs. The result was an epidemic of “overdose and death caused by an oversupply of opioids flooding communities from powerful corporations who sought to profit at the expense of the public,” the suit says. Express Scripts responded Friday that it has long worked to combat opioid overuse and abuse and will “vigorously contest these baseless allegations in court.” Government lawsuits against pharmacy benefit managers are the latest frontier – and maybe the last big one – in years of litigation over the worst drug epidemic the U.S. has ever experienced. The class of drugs is linked to about 75,000 deaths in the U.S. in the 12 months that ended April 30.

• PBM 101: Manufacturer Copay Assistance Programs. Alternate Funding Programs, such as copay assistance programs (CAPs), are offered by manufacturers on some brand name medications to lower patients’ out-of-pocket costs. While the focus is on removing barriers, if not managed, these programs can circumvent the formulary and the plan design’s ability to steer members toward lower cost and effective therapies. In response, Pharmacy Benefit Managers (PBM) have developed programs that plan sponsors can opt into. PBMs either manage their own programs or outsource all or a portion of their programs. One such program is manufacturer copay assistance programs. CAPs are non-need-based programs for those on commercial or private insurance. PBMs typically manage CAP in two ways: accumulator programs and/or variable copay programs.

The Federal Trade Commission (FTC) has filed a significant complaint against some of the largest pharmacy benefit managers (PBMs), including Caremark, Express Scripts, and OptumRx, along with their group purchasing organizations (GPOs). The FTC claims these PBMs are driving up prescription drug costs by manipulating price competition, particularly for critical drugs like insulin.

For self-insured employers, employee benefit brokers, and pharmacy benefit consultants, this case is particularly relevant because it highlights how PBMs’ practices directly impact the cost of your pharmacy benefits. The complaint points out that PBMs have been leveraging their control over drug formularies—lists that determine which drugs are covered and at what price—to demand increasingly higher rebates from drug manufacturers. This approach has led to artificially inflated list prices, which hit patients with high deductibles or co-insurance hardest, forcing many to pay more out-of-pocket.

• PBM Rebate Practices Inflate Drug Prices: PBMs prioritize rebates from drug manufacturers over lowering actual drug costs, leading to higher list prices, particularly for life-saving medications like insulin. This increases costs for self-insured employers and their members.

• Restrictive Formularies Drive Up Costs: PBMs are using exclusionary formularies to negotiate higher rebates, which can lead to employees paying more out-of-pocket for their prescriptions, especially those with high-deductible health plans or coinsurance.

• Impact on Self-Insured Plans: The manipulation of drug pricing by PBMs forces self-insured employers to bear the brunt of inflated pharmacy benefit costs, making it harder to control overall healthcare spending.

• Transparency and Fiduciary Oversight Are Critical: The FTC’s complaint highlights the need for PBM reform. Employers and consultants should push for PBM contracts that ensure transparency, rebate pass-through, and fiduciary responsibility to align incentives with cost control.

• Opportunity to Reassess PBM Relationships: This is an ideal time for employers and brokers to reevaluate PBM contracts, focusing on fiduciary models that prioritize lower net drug prices, transparency, and the well-being of plan members over rebate maximization.

PBMs have introduced restrictive formularies that exclude certain medications to extract larger rebates, instead of focusing on lowering the net cost of medications. Insulin, a life-saving medication for millions of Americans, has seen skyrocketing list prices due to this rebate-driven model. As a result, employers, brokers, and consultants are left managing higher pharmacy benefit costs, while employees bear a greater financial burden, which can ultimately drive up total healthcare costs due to non-adherence to essential medications.

The FTC’s complaint underscores the need for more transparency and a shift away from rebate-driven strategies that inflate drug prices. For self-insured employers and those advising them, understanding how PBM practices affect the total cost of care is crucial. The FTC is pushing for reforms that could lead to better control over drug pricing, greater transparency, and reduced out-of-pocket costs for employees—key factors in managing a more sustainable and cost-effective pharmacy benefit plan.

This is a pivotal moment to reassess PBM contracts, focusing on true fiduciary models that prioritize cost-saving and transparency for plan sponsors and their members.

Pharmaceutical Strategies Group Publishes 2024 Pharmacy Benefit Manager Customer Satisfaction Report and other notes from around the interweb:

• Pharmaceutical Strategies Group Publishes 2024 Pharmacy Benefit Manager Customer Satisfaction Report. The 2024 Pharmacy Benefit Manager Customer Satisfaction Report published by Pharmaceutical Strategies Group (“PSG”) disclosed low satisfaction and demand for change in the industry amongst healthcare payers. This report is the most comprehensive research on pharmaceutical benefit managers (PBMs), with a comprehensive look into the increasingly complex structures and functions of today’s marketplace. The report, published for more than two decades, offers decision makers powerful comparative intelligence to help in the selection and management of services provided by PBMs. PSG’s deep understanding of the marketplace enables a broader view of the arrangements PBMs use to meet the unique priorities of plan sponsors. “PBMs are experiencing increased pressure that is ultimately going to drive change in the coming years,” said Morgan Lee, PhD, MPH, CPH, Senior Director of Research & Strategy at PSG. “This year’s report pulls back the curtain on healthcare payers’ appetite for disruption and the barriers and hesitancy posing roadblocks. Overwhelmingly, there is dissatisfaction with the status quo, but what degree of transformation the industry will undergo in the coming years remains to be seen.”

• Express Scripts Sues FTC, Demands Withdrawal of PBM Report. In a lawsuit filed in federal court in Missouri, Express Scripts by Evernorth, a subsidiary of The Cigna Group (NYSE: CI), demanded that the Federal Trade Commission (“FTC” or the “Commission”) retract its July 2024 report, which is filled with false and misleading claims about the pharmacy benefit management (PBM) industry and fails to serve the interests of American consumers. Information about Express Scripts’ lawsuit to protect those it serves is available at https://www.evernorth.com/advocate. “The FTC has taken unconstitutional actions in publishing a report that ignores the evidence provided by our company and other PBMs, demonstrates clear ideological bias and advances a false and damaging narrative – a narrative that could harm the health care system by removing essential checks and balances which would result in higher drug prices for American consumers,” said Andrea Nelson, Chief Legal Officer for The Cigna Group. “We don’t take this step lightly, but as advocates working to lower drug prices for millions of Americans and the employers, labor unions, and government agencies that provide their prescription drug benefits, we cannot let the FTC’s unlawful actions and false information stand.”

• Walgreens paying $106.8 million to settle US prescription billing fraud charges. Walgreens Boots Alliance (WBA.O), agreed to pay $106.8 million to settle charges it fraudulently billed the U.S. government for prescriptions that were never dispensed, the Department of Justice said on Friday. The Justice Department said Walgreens violated the federal False Claims Act between 2009 and 2020 by submitting payment claims to Medicare, Medicaid, and other healthcare programs for prescriptions it processed but which were never picked up. This caused the pharmacy chain to receive tens of millions of dollars for prescriptions it never provided to patients, the department said. “Federal health care programs provide critical health care services to millions of Americans,” said Brian Boynton, head of the Justice Department’s civil division. “We will hold accountable those who abuse these programs by knowingly billing for goods or services they did not provide.

• Copay Adjustment Chess Match: What Will Payers Do Next?. The primary reason that payers created copay adjustment programs lies within the very nature of their business, namely that insuring patients means taking on the risk of patients’ lives for the pharmaceutical benefit. Additionally, the payers’ clients—employers—demand that payers and pharmacy benefit managers (PBMs) keep drug costs under control since the cost of providing healthcare to their employees remains high. Over the years, formularies, exclusions, and prior authorizations have been created to support this cost control, but using the accumulator technique, in which the patient’s annual out-of-pocket (OOP) maximum is affected by taking off the manufacturer’s contribution, is a newer approach. It all stems from the same reasoning—payers are seeking ways to control costs to benefit their bottom line, while employers are seeking ways to control the costs of providing healthcare to their employees.

Express Scripts Sues FTC, Demands Withdrawal of PBM Report and other notes from around the interweb:

• Express Scripts Sues FTC, Demands Withdrawal of PBM Report. In a lawsuit filed in federal court in Missouri, Express Scripts by Evernorth, a subsidiary of The Cigna Group (NYSE: CI), demanded that the Federal Trade Commission (“FTC” or the “Commission”) retract its July 2024 report, which is filled with false and misleading claims about the pharmacy benefit management (PBM) industry and fails to serve the interests of American consumers. Information about Express Scripts’ lawsuit to protect those it serves is available at https://www.evernorth.com/advocate. “The FTC has taken unconstitutional actions in publishing a report that ignores the evidence provided by our company and other PBMs, demonstrates clear ideological bias and advances a false and damaging narrative – a narrative that could harm the health care system by removing essential checks and balances which would result in higher drug prices for American consumers,” said Andrea Nelson, Chief Legal Officer for The Cigna Group. “We don’t take this step lightly, but as advocates working to lower drug prices for millions of Americans and the employers, labor unions, and government agencies that provide their prescription drug benefits, we cannot let the FTC’s unlawful actions and false information stand.”

• Walgreens paying $106.8 million to settle US prescription billing fraud charges. Walgreens Boots Alliance (WBA.O), agreed to pay $106.8 million to settle charges it fraudulently billed the U.S. government for prescriptions that were never dispensed, the Department of Justice said on Friday. The Justice Department said Walgreens violated the federal False Claims Act between 2009 and 2020 by submitting payment claims to Medicare, Medicaid, and other healthcare programs for prescriptions it processed but which were never picked up. This caused the pharmacy chain to receive tens of millions of dollars for prescriptions it never provided to patients, the department said. “Federal health care programs provide critical health care services to millions of Americans,” said Brian Boynton, head of the Justice Department’s civil division. “We will hold accountable those who abuse these programs by knowingly billing for goods or services they did not provide.”

• Elevance intensifies Ozempic crackdown. Anthem Blue Cross Blue Shield is requesting payments from some providers it alleges falsified patients’ medical records when prescribing Ozempic, Bloomberg reported Sept. 12. A spokesperson for Elevance Health, which owns Anthem BCBS, told Bloomberg it contacted a small number of providers about repayments for Ozempic prescribed to their patients. In some cases, the amount of repayment requested was more than $1 million. Representatives for Elevance told Bloomberg that Anthem BCBS only covers Ozempic for patients with Type 2 diabetes. The drug is not approved by the FDA for weight loss but is often prescribed off-label for that purpose. Ozempic is a prescription medication used to improve blood sugar control in adults with type 2 diabetes. It’s a once-weekly injection that also helps with weight loss by reducing appetite. Its active ingredient is semaglutide, a GLP-1 receptor agonist.

• Copay Adjustment Chess Match: What Will Payers Do Next?. The primary reason that payers created copay adjustment programs lies within the very nature of their business, namely that insuring patients means taking on the risk of patients’ lives for the pharmaceutical benefit. Additionally, the payers’ clients—employers—demand that payers and pharmacy benefit managers (PBMs) keep drug costs under control since the cost of providing healthcare to their employees remains high. Over the years, formularies, exclusions, and prior authorizations have been created to support this cost control, but using the accumulator technique, in which the patient’s annual out-of-pocket (OOP) maximum is affected by taking off the manufacturer’s contribution, is a newer approach. It all stems from the same reasoning—payers are seeking ways to control costs to benefit their bottom line, while employers are seeking ways to control the costs of providing healthcare to their employees.

Pharmacy Benefit Managers (PBMs) play a crucial role in managing prescription drug benefits for employers, brokers, and benefits consultants. However, the lack of transparency in their operations often leaves many organizations struggling to fully understand the costs associated with their pharmacy benefits. This is where our webinar, Unlocking the Secrets of PBMs: Strategies to Navigate Their Profit Tactics, comes in—offering a deep dive into the opaque world of PBMs and equipping you with the knowledge to take control of your pharmacy spend.

The strategies we discuss in this session are designed to help employers, brokers, and benefits consultants identify and mitigate hidden profit tactics that can lead to inflated costs. PBMs often employ complex pricing structures, hidden fees, and undisclosed rebate arrangements that can significantly impact the overall cost of pharmacy benefits. By attending this webinar, you’ll learn how to spot these tactics and implement effective strategies to minimize their financial impact.

One of the key takeaways from this webinar is understanding the importance of a fiduciary standard of care. Unlike traditional PBM models that prioritize profits, a fiduciary approach ensures that the PBM acts in the best interest of the plan sponsor and its members. This approach not only aligns with ethical standards but also helps in achieving cost savings without compromising patient outcomes. We’ll explore real-world examples and case studies that highlight the difference a fiduciary PBM model can make in controlling pharmacy costs.

Additionally, the webinar covers actionable insights on negotiating better contracts, optimizing formulary management, and leveraging data analytics to make informed decisions. These strategies empower you to create a more transparent and cost-effective pharmacy benefits program tailored to your organization’s needs. By understanding how to navigate the PBM landscape, you can ensure that every dollar spent on pharmacy benefits delivers maximum value to your organization and your members.

For employers, brokers, and benefits consultants committed to reducing pharmacy costs while maintaining high-quality care, this webinar is a must-watch. Don’t miss out on the opportunity to learn from experts who have been on the front lines of PBM negotiations and cost management. Equip yourself with the knowledge and tools to challenge the status quo and drive meaningful change in your pharmacy benefits strategy.

Watch Unlocking the Secrets of PBMs: Strategies to Navigate Their Profit Tactics today and take the first step towards regaining control over your pharmacy spend. Your path to a more transparent, cost-effective, and patient-centered pharmacy benefit plan starts here.

In today’s complex healthcare landscape, understanding the roles of rebate aggregators and Group Purchasing Organizations (GPOs) owned by Pharmacy Benefit Managers (PBMs) is crucial. These entities significantly influence prescription drug costs and the management of pharmacy benefits. This comprehensive guide explores their functions, origins, and how you—as an employee benefit broker, HR executive, or CFO—can leverage these relationships in maximizing benefits with rebate aggregators and controlling costs.

What Is Rebate Aggregation?

Understanding Rebate Aggregators

Rebate aggregation involves the collection and management of pharmaceutical manufacturer rebates by PBMs. Manufacturers offer these rebates to promote their drugs’ inclusion on PBM formularies and to incentivize higher utilization. PBMs negotiate rebate terms based on expected drug volumes and market share, aggregating rebates across multiple plan sponsors to enhance negotiating power. Depending on contractual agreements, rebates are either passed back to plan sponsors like employers and insurers or retained by PBMs.

The Purpose of Rebate Aggregation

The primary aim is cost reduction. By pooling rebates, PBMs can lower the net cost of prescription drugs for plan sponsors. This aggregation increases market leverage against pharmaceutical manufacturers and streamlines processes for employers and insurers, simplifying the rebate management process.

The Role of PBM-Owned GPOs

What Are Group Purchasing Organizations?

GPOs are entities that consolidate the purchasing power of multiple organizations to secure discounts from vendors, including drug manufacturers. In healthcare, they play a pivotal role in reducing costs for medications and medical supplies by negotiating lower prices and improved contract terms.

Why PBMs Own GPOs

PBMs have acquired or established GPOs to enhance their negotiating power further. Owning GPOs allows PBMs to amplify their purchasing volume, streamline procurement and rebate processes under one umbrella, and potentially increase revenue by retaining more rebates and fees. However, this ownership structure can raise transparency concerns, potentially obscure rebate flows and fee arrangements, and lead to conflicts of interest where PBMs might prioritize their profits over client savings. It also attracts regulatory scrutiny over anti-competitive practices and compliance issues.

Why Were Rebate Aggregators and GPOs Created?

Historical Context and Intended Benefits

The creation of rebate aggregators and GPOs was driven by rising drug prices and a fragmented market where individual buyers lacked the clout to negotiate favorable terms. Employers and insurers sought efficient strategies to manage complex pharmacy benefits. These entities were designed to achieve cost savings by reducing prices for all members through collective bargaining, simplify negotiations, and provide improved access to medications through broader bargaining power.

Leveraging Relationships with Rebate Aggregators and PBM-Owned GPOs

Effectively navigating these relationships is key to maximizing benefits and minimizing costs.

Strategies for Employee Benefit Brokers

• Demand Transparency: Insist on clear disclosure of rebate amounts and distribution methods from PBMs.
• Thorough Contract Review: Examine PBM contracts for terms related to rebates and GPO affiliations, ensuring they align with client interests.
• Market Comparison: Evaluate multiple PBMs and GPOs to secure the best terms for clients, considering both cost and service quality.

Best Practices for HR Executives

• Align Benefits with Company Goals: Ensure that pharmacy benefits support overall organizational objectives and employee wellness.
• Educate Employees: Inform staff about formulary changes, how to maximize their benefits, and encourage the use of cost-effective medication options.
• Monitor Performance: Regularly assess the effectiveness of pharmacy benefits, employee satisfaction, and seek improvements where necessary.

Financial Insights for CFOs

• Analyze Cost Impacts: Evaluate how rebate structures and GPO affiliations affect the company’s financial health and budget forecasts.
• Assess Risks: Be aware of compliance and regulatory risks associated with PBM and GPO dealings, including potential audits and legal implications.
• Negotiate Aggressively: Leverage the organization’s size and PBM knowledge to negotiate better terms.

The Importance of Transparency and Compliance

Addressing Transparency Issues

To mitigate transparency concerns, require PBMs to provide comprehensive reports on rebate earnings and allocations. Include contractual provisions that allow for third-party audits of rebate dealings to ensure accuracy and honesty. Staying informed about laws governing rebate practices is essential to ensure adherence and avoid regulatory penalties.

Mitigating Conflicts of Interest

Structure agreements that align PBM incentives with your organization’s goals, such as performance-based contracts that reward cost savings and quality service. Consider engaging independent consultants or third-party advisors to assess PBM relationships and negotiations objectively, ensuring that decisions are made in the best interest of your organization and employees.

Conclusion

Understanding and maximizing benefits with rebate aggregators and PBM-owned GPOs is essential for controlling prescription drug costs and enhancing pharmacy benefits. By staying informed, being proactive in contract management, and prioritizing transparency, you can significantly impact your organization’s healthcare spending and employee satisfaction.

Optimize Your Pharmacy Benefits Today

Don’t let the complexities of rebate aggregation and PBM-owned GPOs hinder your organization’s success. Take action now to maximize your benefits and minimize costs. For personalized assistance, contact our experts who specialize in navigating these intricate relationships.

Walgreens will pay $106.8 million to settle claims of fraudulently billing for undispensed prescriptions and other notes from around the interweb:

• Walgreens paying $106.8 million to settle US prescription billing fraud charges. Walgreens Boots Alliance (WBA.O), agreed to pay $106.8 million to settle charges it fraudulently billed the U.S. government for prescriptions that were never dispensed, the Department of Justice said on Friday. The Justice Department said Walgreens violated the federal False Claims Act between 2009 and 2020 by submitting payment claims to Medicare, Medicaid, and other healthcare programs for prescriptions it processed but which were never picked up. This caused the pharmacy chain to receive tens of millions of dollars for prescriptions it never provided to patients, the department said. “Federal health care programs provide critical health care services to millions of Americans,” said Brian Boynton, head of the Justice Department’s civil division. “We will hold accountable those who abuse these programs by knowingly billing for goods or services they did not provide.”

• Elevance intensifies Ozempic crackdown. Anthem Blue Cross Blue Shield is requesting payments from some providers it alleges falsified patients’ medical records when prescribing Ozempic, Bloomberg reported Sept. 12. A spokesperson for Elevance Health, which owns Anthem BCBS, told Bloomberg it contacted a small number of providers about repayments for Ozempic prescribed to their patients. In some cases, the amount of repayment requested was more than $1 million. Representatives for Elevance told Bloomberg that Anthem BCBS only covers Ozempic for patients with Type 2 diabetes. The drug is not approved by the FDA for weight loss but is often prescribed off-label for that purpose. Ozempic is a prescription medication used to improve blood sugar control in adults with type 2 diabetes. It’s a once-weekly injection that also helps with weight loss by reducing appetite. Its active ingredient is semaglutide, a GLP-1 receptor agonist.

• Copay Adjustment Chess Match: What Will Payers Do Next?. The primary reason that payers created copay adjustment programs lies within the very nature of their business, namely that insuring patients means taking on the risk of patients’ lives for the pharmaceutical benefit. Additionally, the payers’ clients—employers—demand that payers and pharmacy benefit managers (PBMs) keep drug costs under control since the cost of providing healthcare to their employees remains high. Over the years, formularies, exclusions, and prior authorizations have been created to support this cost control, but using the accumulator technique, in which the patient’s annual out-of-pocket (OOP) maximum is affected by taking off the manufacturer’s contribution, is a newer approach. It all stems from the same reasoning—payers are seeking ways to control costs to benefit their bottom line, while employers are seeking ways to control the costs of providing healthcare to their employees.

• 3 Trends Reshaping Pharmacy Benefits Management. We offer a comprehensive analysis of three critical areas transforming the sector: GLP-1 medications, biosimilars, and PBM transparency. Our analysis covers diabetes and weight loss management trends, the impact of biosimilars on the market, and the complexities of PBM rebate structures. The prevalence of diabetes in the United States has reached alarming levels, with approximately 12% of adults diagnosed with the condition. Even more concerning is the additional 40% of the population classified as pre-diabetic, underscoring the potential for a significant increase in diabetes diagnoses in the near future. This epidemiological landscape has profound implications for employer-sponsored health plans, particularly in relation to the coverage of GLP-1 (Glucagon-Like Peptide-1) receptor agonists.

Navigating the world of pharmacy benefits can be complex, but it’s essential for those managing employee health plans. A key piece of this puzzle is understanding how formulary positions are decided. Formulary position refers to the placement of drugs on a list that determines how easily they can be accessed and how much they will cost. This placement can have significant cost implications for employers and employees alike. Here are three main points from the paper “The Market Design for Formulary Position” that are particularly relevant for employee benefit brokers and self-funded employers.

Formulary Position as a Market: How It Works

• Imagine the formulary position like a market where drug manufacturers (Pharma) bid for prime spots on the list. These spots are often managed by Pharmacy Benefit Managers (PBMs), who act as gatekeepers. The more favorable the position, the more likely a drug will be used, which means big business for Pharma companies.
• This process is similar to an auction. Like Google’s ad placement system, where higher bids secure better ad positions, Pharma companies pay rebates (a type of discount given after a drug is sold) to PBMs for these prime formulary positions. The PBMs then decide which drugs to favor based on these rebates, expected demand, and other factors like drug effectiveness.

Impact on Costs: Mature vs. Immature Therapeutic Classes

• The paper explains that the way drugs are positioned can depend on whether the therapeutic class (the category of treatment) is “mature” or “immature.” Mature classes have a lot of competition with multiple drugs offering similar benefits, like different brands of painkillers. In these cases, PBMs have a history of how well these drugs work, which helps them make cost-effective decisions.
• For immature classes, where new drugs are just entering the market, things get trickier. There’s uncertainty about how well these new entrants will perform. This uncertainty gives established drugs (incumbents) more power because PBMs are hesitant to favor new drugs that might not meet demand, even if they are cheaper. This dynamic can keep prices high and limit the cost-saving potential of new competition.

Rebates and Exclusionary Tactics: A Double-Edged Sword

• Rebates can help lower the cost of drugs by incentivizing PBMs to choose certain drugs over others. However, the paper highlights that these rebates can also be used in ways that exclude new market entrants. Incumbent drugs might offer lump sum rebates, a large upfront payment to PBMs, to maintain their dominance and keep new competitors out.
• This practice can drive up the overall cost for employers and employees because it limits competition. Without competition, there’s less pressure on incumbents to lower prices. This can result in higher costs for health plans and, ultimately, higher premiums for employees.

Key Takeaway for Employers and Brokers:

Understanding the market dynamics of formulary positions can help you advocate for more cost-effective pharmacy benefits. By recognizing the strategies PBMs and Pharma companies use, you can push for formulary designs that prioritize not just rebates but also value and access, ensuring that your employees get the medications they need at a fair price.

Chairman Comer Calls on PBM Executives to Correct Hearing Testimony and other notes from around the interweb:

• Chairman Comer Calls on PBM Executives to Correct Hearing Testimony. House Committee on Oversight and Accountability Chairman James Comer (R-Ky.) today is calling on the CEOs of three major Pharmacy Benefit Managers (PBMs)—CVS Caremark, Express Scripts, and Optum Rx—to correct the record for statements made during their appearance before the House Oversight Committee at a hearing titled, “The Role of Pharmacy Benefit Managers in Prescription Drug Markets Part III: Transparency and Accountability.” At the House Oversight Committee’s hearing, the PBM chief executives made statements that contradict the Committee’s and the Federal Trade Commission’s findings about the PBMs’ self-benefitting practices that jeopardize patient care, undermine local pharmacies, and raise prescription drug prices. The chief executives for CVS Caremark, Express Scripts, and Optum Rx claimed they do not steer patients to PBM-owned pharmacies. The executives also made claims contradicting the Committee’s and FTC’s findings regarding contract negotiations, contract opt outs, and payments to pharmacies.

• Three Things That Employer Health Plan Sponsors Should Do When the New MHPAEA Rules Are Published. In particular, the proposed rules would implement amendments to MHPAEA that were passed under the Consolidated Appropriations Act of 2021 (CAA) to require documentation of comparative analyses for Non-Quantitative Treatment Limits (NQTLs). We anticipate that the Tri-Departments will publish new regulations for MHPAEA that will finalize most provisions of the NPRM in the coming days or weeks. We anticipate that most provisions of the new regulations will finalize the proposed requirements without significant modifications. However, robust public comments were submitted regarding several key provisions that may cause the Tri-Departments to modify or rescind the proposed rules. Three of the most controversial provisions from the proposed rules to watch for in the final rules are: Quantitative testing for Non-Quantitative Treatment Limits, Application of MHPAEA to intellectual and developmental disabilities, including autism spectrum disorder, and Fiduciary liability for health plan sponsors.

• 3 Trends Reshaping Pharmacy Benefits Management. We offer a comprehensive analysis of three critical areas transforming the sector: GLP-1 medications, biosimilars, and PBM transparency. Our analysis covers diabetes and weight loss management trends, the impact of biosimilars on the market, and the complexities of PBM rebate structures. The prevalence of diabetes in the United States has reached alarming levels, with approximately 12% of adults diagnosed with the condition. Even more concerning is the additional 40% of the population classified as pre-diabetic, underscoring the potential for a significant increase in diabetes diagnoses in the near future. This epidemiological landscape has profound implications for employer-sponsored health plans, particularly in relation to the coverage of GLP-1 (Glucagon-Like Peptide-1) receptor agonists.

• CMS’ negotiated drug prices: 12 notes. The brand names of the 10 drugs included under IRA price negotiations are as follows: Januvia; multiple Novo Nordisk variations to treat diabetes, including Fiasp; Farxiga; Enbrel; Jardiance; Stelara; Xarelto; Eliquis; Entresto; and Imbruvica. The largest discount among all 10 drugs is 79%, lowering the list price for a 30-day supply of Januvia in 2023 from $527 to $113. The most expensive drug covered, also the drug with the smallest discount at 38%, is Imbruvica for the treatment of blood cancers. Imbruvica’s list price for a 30-day supply in 2023 was just under $15,000 and will now be offered at $9,319 for Medicare-covered patients in 2026. Some of the other drugs included were approved to treat various conditions including diabetes, cardiovascular diseases, kidney disease, arthritis, psoriasis, Crohn’s disease, ulcerative colitis, blood clots, and more.