In an era where healthcare expenditures are skyrocketing, particularly due to the soaring prices of specialty medications, stakeholders across the spectrum are grappling with financial strategies to manage these burgeoning costs. This blog delves into the complexities surrounding the economics of healthcare, emphasizing the pivotal role of innovative insurance solutions in this ever-evolving landscape. Navigating the waters of stop-loss insurance requires a keen cost-management process and knowledgeable staff.

The healthcare industry is witnessing an unprecedented rise in the cost of specialty medications. These drugs, essential in combating various chronic and life-threatening conditions, demand extensive research and development, often targeting smaller patient populations. This necessity for intensive investment has led to these medications now representing a sizable portion of healthcare spending.

The Dilemma for Employers: Cost Containment Strategies

Employers, particularly those managing self-funded healthcare plans, face the daunting task of balancing quality healthcare provision with financial sustainability. Initiatives like patient assistance programs offer some respite, but the reliance on traditional stop-loss insurance reveals inherent shortcomings. This insurance, designed to mitigate large claim impacts, often falls short in offering long-term, comprehensive protection, particularly in managing the costs of specialty medications.

A critical aspect often overlooked in stop-loss insurance is ‘lasering’ – a practice where insurers exclude high-cost claims or claimants from coverage. This practice, while not directly affecting members due to continued benefits, leaves employers financially exposed. The implications are profound, especially when considering catastrophic drug claims that can escalate employer liabilities exponentially.

Imagine a company, XYZ Corp, operates a self-funded health plan for its employees. In a given year, an employee’s child is diagnosed with a rare illness requiring an expensive treatment costing $500,000. XYZ’s stop-loss insurance has a specific deductible of $200,000 per claimant, meaning the insurer will cover costs above this threshold.

However, mid-year, the insurer applies lasering to this claimant, increasing the specific deductible to $400,000 for the next policy year due to the high cost. Now, if the child’s treatment continues to be expensive, XYZ will be responsible for costs up to $400,000.

This is where supplemental stop-loss insurance comes in. It can provide coverage for the gap between the original specific deductible and the increased amount due to lasering. For example, it might cover costs between $200,000 and $400,000, protecting XYZ from bearing the full financial burden of this unexpected increase in healthcare costs.

Conclusion: Charting a Course through Complex Healthcare Financial Waters

As the healthcare industry continues to evolve, understanding and navigating the intricacies of healthcare economics becomes crucial. The rise in specialty medication costs and the challenges of traditional stop-loss insurance underscore the need for comprehensive, forward-thinking solutions. Supplemental stop-loss insurance stands out as a key strategy in this context, offering a safety net for employers and ensuring the sustainability of healthcare provisions.

CMS letter to pharmacy benefit management companies and other notes from around the interweb:

• CMS letter to pharmacy benefit management companies. The Centers for Medicare & Medicaid Services (CMS) values your partnership in providing health care coverage and access to essential treatments, including prescription medications, to millions of people. However, we are hearing an increasing number of concerns about certain practices by some plans and pharmacy benefit managers (PBMs) that threaten the sustainability of many pharmacies, impede access to care, and put increased burden on health care providers. We are writing to share these concerns and to encourage you to work with providers and pharmacies to alleviate these issues and safeguard access to care.

• NC wanted to share information on drug pricing. Here’s how it got shot down. For a brief few weeks, N.C. State Health Plan members had a rare window into the secretive world of drug pricing. Days before the health plan trustees met to discuss whether the plan could afford to continue covering obesity medications manufactured by pharmaceutical giant Novo Nordisk, staff posted online pages of pricing information they had prepared based on an analysis of expenditures. Notably, the documents estimated the discount, or “rebate,” Novo Nordisk had agreed to give NCSHP for these drugs — a piece of information that is considered a trade secret in the pharmaceutical industry.

• Plan Sponsors Have a Fiduciary Duty to Employees that Includes Scrutiny of PBM-Owned Rebate Aggregators. Drug manufacturer rebates can be a valuable tool for controlling the rising costs of prescription drugs. Most manufacturers offer a rebate program through which they agree to return a part of the drug’s list price to plans in exchange for access to the plans’ drug “formulary”. Rebates are intended to flow through to the plan sponsors and benefit patients, reducing their overall drug spend. The rebate process has been hijacked by PBMs and their sister-aggregators. PBMs utilize rebate aggregators to negotiate drug manufacturer rebates on behalf of the plans they administer. In 2022, just three PBMs along with their rebate aggregators, controlled 79 percent of the market. Some of the largest rebate aggregators include Zinc (owned by CVS Caremark), Ascent (owned by Express Scripts), and Emisar (owned by United Healthcare).

• Why such ‘high markups’? Senators seek drug price probe of insurers who own PBMs. The senators urged Inspector General Christi Grimm to determine if large insurance companies are using their vertically integrated pharmacies to evade federal requirements that limit the percentage of premium dollars spent on profits and administration, known as the Medical Loss Ratio, or MLR. The letter follows an investigation by the Wall Street Journal revealing significant markups of generic drugs at specialty pharmacies owned by CVS Aetna (which operates the Caremark PBM), Cigna (which owns Express Scripts) and UnitedHealthcare, which owns a PBM and specialty pharmacy. The Journal’s analysis found that the three companies charged up to twenty-seven times more than a generic reference pharmacy for a selection of nineteen drugs. For example, a monthly supply of the generic version of Tarcera, a lung cancer drug, costs $73 at the generic reference pharmacy, compared to $4,409 through Cigna.

Warrants in outcomes rebates are a financial mechanism used by pharmaceutical manufacturers in their contracts with payers, such as PBMs, insurance companies or government healthcare programs. These warrants are essentially a form of guarantee or insurance that the pharmaceutical companies provide regarding the performance or effectiveness of their drugs. Here’s how outcomes-based rebates in pharmaceuticals work and why they are used:

1. What are Warrants in Outcomes Rebates?
   • Warrants in outcomes rebates are contractual agreements between a pharmaceutical manufacturer and a payer (i.e. PBM, health plan). In these agreements, the manufacturer promises a rebate or financial return if the drug does not meet specified outcomes or performance metrics.
   • These outcomes or metrics are typically related to the drug’s effectiveness in treating a condition, the improvement in patient health, or achieving certain health benchmarks.

2. How Do They Work?
   • When a pharmaceutical company sells a drug, it can include a warrant in the contract that promises a rebate if the drug does not achieve the agreed-upon outcomes.
   • The specific outcomes are predefined and could be based on clinical trial data, real-world evidence, or agreed-upon health metrics.
   • If the drug fails to meet these benchmarks, the pharmaceutical company provides a rebate to the payer. This rebate could be a partial or full refund of the drug’s cost.

3. Why Do Pharmaceutical Manufacturers Rely on Them?
   • Risk Sharing: Warrants in outcomes rebates allow pharmaceutical companies to share the risk of drug performance with payers. This can be particularly important for expensive drugs or those with variable outcomes.
   • Market Access: By offering these warrants, manufacturers can make their products more attractive to payers, potentially increasing market access and acceptance.
   • Building Trust: These agreements can build trust with payers and prescribers by showing confidence in the drug’s effectiveness.
   • Support for Premium Pricing: For drugs that are highly effective but expensive, warrants can justify the high cost by tying the price to actual performance.
   • Encouraging Innovation: They can encourage innovation by aligning the financial incentives of the manufacturer with the actual health outcomes of patients.

To manage the risk associated with outcomes-based rebates in pharmaceuticals, pharmaceutical companies may purchase insurance policies. These policies can cover the potential financial losses that arise if the drug fails to meet the agreed-upon outcomes and a rebate is due. The insurance essentially transfers a portion of the financial risk from the pharmaceutical company to the insurance provider.

Overall, warrants in outcomes rebates represent a move towards value-based pricing in the pharmaceutical industry, where the focus is on paying for the actual value or benefit provided by a drug, rather than just the drug itself. This approach can lead to more sustainable healthcare spending and better alignment of incentives among manufacturers, payers, and patients.

Hospitals are dropping Medicare Advantage plans left and right and other notes from around the interweb:

• Hospitals are dropping Medicare Advantage plans left and right. Medicare Advantage provides health coverage to more than half of the nation’s seniors, but a growing number of hospitals and health systems nationwide are pushing back and dropping some or all contracts with the private plans altogether. Among the most cited reasons are excessive prior authorization denial rates and slow payments from insurers. Some systems have noted that most MA carriers have faced allegations of billing fraud from the federal government and are being probed by lawmakers over their high denial rates. “It’s become a game of delay, deny and not pay,” Chris Van Gorder, president, and CEO of San Diego-based Scripps Health, told Becker’s. “Providers are going to have to get out of full-risk capitation because it just doesn’t work — we’re the bottom of the food chain, and the food chain is not being fed.”

• PBMs Should Brace for a Copay Accumulator Program Shift. Starting in 2020, the Centers for Medicare & Medicaid Services (CMS) allowed insurers to use copay accumulators for brand-name drugs that have a suitable generic alternative. However, for plan year 2021, CMS changed the rules to permit copay accumulators for all drugs, regardless of generic availability. This broader rule was challenged in the D.C. Circuit Court and overturned. As a result, the 2020 regulation is back in effect, meaning copay accumulators can only be applied to brand drugs that have a medically appropriate generic equivalent.

• Plan Sponsors Have a Fiduciary Duty to Employees that Includes Scrutiny of PBM-Owned Rebate Aggregators. Drug manufacturer rebates can be a valuable tool for controlling the rising costs of prescription drugs. Most manufacturers offer a rebate program through which they agree to return a part of the drug’s list price to plans in exchange for access to the plans’ drug “formulary”. Rebates are intended to flow through to the plan sponsors and benefit patients, reducing their overall drug spend. The rebate process has been hijacked by PBMs and their sister-aggregators. PBMs utilize rebate aggregators to negotiate drug manufacturer rebates on behalf of the plans they administer. In 2022, just three PBMs along with their rebate aggregators, controlled 79 percent of the market. Some of the largest rebate aggregators include Zinc (owned by CVS Caremark), Ascent (owned by Express Scripts), and Emisar (owned by United Healthcare).

• Pharmacy Benefit Managers: History, Business Practices, Economics, and Policy. Pharmacy benefit managers evolved in parallel with the pharmaceutical manufacturing and health insurance industries. The evolution of the PBM industry has been characterized by horizontal and vertical integration and market concentration. The PBM provides key functions: formulary design, utilization management, price negotiation, pharmacy network formation, and mail order pharmacy services. Criticism of the PBM industry centers around the lack of competition, pricing, agency problems, and lack of transparency. Legislation to address these concerns has been introduced at the state and federal levels, but the potential for these policies to address concerns about PBMs is unknown and may be eclipsed by private sector responses.

PBM copay accumulator programs are a relatively recent development in the health insurance industry, particularly in the United States. These programs have significant implications for patients, especially those requiring expensive, specialty medications. Copay accumulator programs are policies implemented by some health insurers and pharmacy benefit managers (PBM). Under these programs, any payments made by a third party (such as a drug manufacturer’s copay assistance program) do not count towards a patient’s deductible or out-of-pocket maximum.

Understanding Copay Accumulator Programs

• Patients who rely on manufacturer copay assistance to afford expensive medications find themselves facing higher out-of-pocket costs once the assistance is exhausted. This can happen mid-year, leaving patients suddenly responsible for large expenses.
• The increased cost burden can lead to non-adherence to medication regimens, as patients may skip doses or stop taking medications due to cost.

The Role of Pharmacy Benefit Managers (PBMs)

PBMs, who manage prescription drug benefits on behalf of health insurers, play a crucial role in the implementation of copay accumulator programs.

• PBMs may have financial incentives to promote copay accumulator programs. By not allowing manufacturer assistance to count towards deductibles, they effectively extend the period during which patients pay out-of-pocket, potentially increasing the PBMs’ share of drug costs covered by patients.
• PBMs may use the existence of manufacturer assistance programs as leverage in price negotiations with drug manufacturers, arguing that these programs reduce the effective price of drugs.
• Employers, especially those providing self-funded health insurance plans, are often persuaded by PBMs to adopt copay accumulator programs. PBMs may present these programs as cost-saving measures.
• There is often a lack of transparency in how PBMs communicate the impact of these programs to employers and, subsequently, to the employees. This lack of clarity can lead to unexpected expenses for patients who are unaware of the program’s details.

How Copay Accumulators Work

In a copay accumulator program, when a patient uses a drug manufacturer’s copay card or coupon to pay for a medication, this amount does not count towards their deductible or out-of-pocket maximum. Once the copay assistance is exhausted, the patient must pay out-of-pocket until their deductible is met.

Example:

Imagine a patient, Alex, has a $3,000 annual deductible. Alex uses a medication that costs $1,000 per month. Alex has a copay card from the drug manufacturer that covers $900 of the cost each month. For the first three months, Alex pays $100 out-of-pocket (the remaining cost after copay card), totaling $300. However, since the $2,700 paid by the copay card doesn’t count towards the deductible, Alex still has the full $3,000 deductible remaining. Once the copay card is maxed out, Alex must pay the full $1,000 per month until the deductible is met.

How Copay Maximizers Work

Copay maximizers set a minimum out-of-pocket cost for all patients using a manufacturer’s copay card, regardless of the actual drug cost. The program spreads the value of the copay card across the year, ensuring that it counts towards the deductible but also maximizing the time the patient uses the copay assistance.

Example:

Consider another patient, Jordan, with a similar $3,000 deductible. Jordan’s medication costs $1,000 per month, with a copay card covering up to $2,700 annually. Instead of using the $900 per month from the copay card, the insurer sets Jordan’s minimum monthly out-of-pocket cost at $225 ($2,700 / 12 months). This way, the copay card lasts the entire year, but Jordan consistently pays more each month. The payments go towards the deductible, but Jordan’s out-of-pocket costs are spread throughout the year.

Key Differences and Impacts

Accumulator programs can lead to a sudden, large out-of-pocket expense once the copay assistance runs out, while maximizer programs spread out costs but ensure higher consistent payments from the patient. Both strategies can lead to increased out-of-pocket costs for patients, especially those needing high-cost medications. They can also lead to confusion and financial strain, as patients may not fully understand how their payments are being applied towards their deductibles.

Conclusion

Copay accumulator programs represent a complex and contentious issue in healthcare. While PBMs and insurers may argue that these programs are necessary to control costs and ensure fair pricing, the direct impact on patients, particularly those requiring expensive treatments, is often negative. Increased costs can lead to medication non-adherence, potentially worsening health outcomes.

The role of PBMs in these programs, coupled with the lack of transparency and the push to get employer buy-in, highlights the need for greater scrutiny and regulatory intervention to protect patient interests. In summary, both copay accumulators and maximizers are cost-management strategies used by insurers and PBMs that can significantly alter the financial burden on patients, often leading to higher out-of-pocket expenses over time.

PBMs Should Brace for a Copay Accumulator Program Shift and other notes from around the interweb:

• PBMs Should Brace for a Copay Accumulator Program Shift. Starting in 2020, the Centers for Medicare & Medicaid Services (CMS) allowed insurers to use copay accumulators for brand-name drugs that have a suitable generic alternative. However, for plan year 2021, CMS changed the rules to permit copay accumulators for all drugs, regardless of generic availability. This broader rule was challenged in the D.C. Circuit Court and overturned. As a result, the 2020 regulation is back in effect, meaning copay accumulators can only be applied to brand drugs that have a medically appropriate generic equivalent.

• Plan Sponsors Have a Fiduciary Duty to Employees that Includes Scrutiny of PBM-Owned Rebate Aggregators. Drug manufacturer rebates can be a valuable tool for controlling the rising costs of prescription drugs. Most manufacturers offer a rebate program through which they agree to return a part of the drug’s list price to plans in exchange for access to the plans’ drug “formulary”. Rebates are intended to flow through to the plan sponsors and benefit patients, reducing their overall drug spend. The rebate process has been hijacked by PBMs and their sister-aggregators. PBMs utilize rebate aggregators to negotiate drug manufacturer rebates on behalf of the plans they administer. In 2022, just three PBMs along with their rebate aggregators, controlled 79 percent of the market. Some of the largest rebate aggregators include Zinc (owned by CVS Caremark), Ascent (owned by Express Scripts), and Emisar (owned by United Healthcare).

• Pharmacy Benefit Managers: History, Business Practices, Economics, and Policy. Pharmacy benefit managers evolved in parallel with the pharmaceutical manufacturing and health insurance industries. The evolution of the PBM industry has been characterized by horizontal and vertical integration and market concentration. The PBM provides key functions: formulary design, utilization management, price negotiation, pharmacy network formation, and mail order pharmacy services. Criticism of the PBM industry centers around the lack of competition, pricing, agency problems, and lack of transparency. Legislation to address these concerns has been introduced at the state and federal levels, but the potential for these policies to address concerns about PBMs is unknown and may be eclipsed by private sector responses.

• Competition in Commercial PBM Markets and Vertical Integration of Health Insurers with PBMs: 2023 Update. Based on 2020 data and newly acquired 2021 data for people with a commercial drug benefit tied to a medical benefit and the PBMs used by insurers, the updated analysis presents market insight on five PBM services performed for insurers: rebate negotiation, retail network management, claim adjudication, formulary management, and benefit design. Insurers face a make-or-buy decision—they can perform these functions in-house or buy them from a PBM. The AMA Policy Research Perspectives report, “Competition in Commercial PBM Markets and Vertical Integration of Health Insurers with PBMs: 2023 Update”, found that insurers use a PBM for three of them—rebate negotiation, retail network management and claims adjudication—and therefore assessed market competition for those three product markets.

Five Exceptional Individuals Earn Prestigious CPBS Designation; Frank Chen, Achieves Top Honors with Perfect Final Exam Score

The Pharmacy Benefit Institute of America (PBIA) is delighted to announce the latest group of accomplished professionals who have successfully completed the rigorous Certified Pharmacy Benefits Specialist (CPBS) program. This class’s cohort includes Frank Chen, Shravan Patel, Janice Rhee, Barry Rowley, and Cynthia Yu who have all demonstrated exceptional dedication and skill in the field of pharmacy benefits management.

Leading the class with distinction, Frank Chen achieved a remarkable feat by scoring a perfect score on the final exam, setting a high standard for future cohorts. This accomplishment is a testament to his commitment and expertise in the domain of pharmacy benefits.

The CPBS program, offered exclusively by PBIA, is an in-depth certification designed to equip professionals with comprehensive knowledge and skills essential for navigating the complex landscape of pharmacy benefits. Covering a wide array of topics such as industry trends, healthcare regulations, cost management strategies, and patient care optimization, the program prepares individuals for leadership roles in the industry.

Each graduate has shown remarkable commitment to their professional development and the advancement of the pharmacy benefits sector. Their achievements are indicative of their dedication to staying abreast of industry trends and delivering the highest quality of care and service to patients.

“We are incredibly proud of the hard work and dedication shown by these individuals in earning their CPBS designation,” said Tyrone Squires, Founder of PBIA. “Their drive for continuous learning and excellence is inspirational and sets a benchmark in the pharmacy benefits management field.”

PBIA extends its heartfelt congratulations to these graduates on their remarkable achievement and wishes them continued success in their careers. The CPBS designation is a clear indicator of their expertise and commitment to advancing the pharmacy benefits management field.

For more information about the CPBS program and PBIA, please visit https://pharmacybenefitinstitute.com or contact Maricor Bonjoc at info@pharmacybenefitinstitute.com or 702-389-1159.

[About PBIA]
The Pharmacy Benefit Institute of America (PBIA) is a leading organization dedicated to providing comprehensive education and professional development in the field of pharmacy benefits management. Approved by various authoritative bodies, PBIA offers certification programs and resources to empower professionals with the knowledge and skills essential in this dynamic industry.

Maricor Bonjoc
Pharmacy Benefit Institute of America
+1 866-499-1940 ext. 244
info@pharmacybenefitinstitute.com
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Plan Sponsors Have a Fiduciary Duty to Employees that Includes Scrutiny of PBM-Owned Rebate Aggregators and other notes from around the interweb:

• Plan Sponsors Have a Fiduciary Duty to Employees that Includes Scrutiny of PBM-Owned Rebate Aggregators. Drug manufacturer rebates can be a valuable tool for controlling the rising costs of prescription drugs. Most manufacturers offer a rebate program through which they agree to return a part of the drug’s list price to plans in exchange for access to the plans’ drug “formulary”. Rebates are intended to flow through to the plan sponsors and benefit patients, reducing their overall drug spend. The rebate process has been hijacked by PBMs and their sister-aggregators. PBMs utilize rebate aggregators to negotiate drug manufacturer rebates on behalf of the plans they administer. In 2022, just three PBMs along with their rebate aggregators, controlled 79 percent of the market. Some of the largest rebate aggregators include Zinc (owned by CVS Caremark), Ascent (owned by Express Scripts), and Emisar (owned by United Healthcare).

• Pharmacy Benefit Managers: History, Business Practices, Economics, and Policy. Pharmacy benefit managers evolved in parallel with the pharmaceutical manufacturing and health insurance industries. The evolution of the PBM industry has been characterized by horizontal and vertical integration and market concentration. The PBM provides key functions: formulary design, utilization management, price negotiation, pharmacy network formation, and mail order pharmacy services. Criticism of the PBM industry centers around the lack of competition, pricing, agency problems, and lack of transparency. Legislation to address these concerns has been introduced at the state and federal levels, but the potential for these policies to address concerns about PBMs is unknown and may be eclipsed by private sector responses.

• Elevance, Cigna settle contract claims, clearing way for appeal in $14.8 bln suit. Elevance previously owned a PBM, NextRx. In 2008, with NextRx’s business struggling, Elevance started looking for a larger PBM to buy NextRx and contract to provide Elevance’s PBM services. Express Scripts submitted the winning bid for that process, but Elevance alleged in its lawsuit that after being awarded the contract, it refused to negotiate in good faith. Express Scripts in turn accused Elevance of bad faith. It dropped that claim earlier this year, but reserved the right to revive it if Elevance’s lawsuit is revived on appeal.

• Competition in Commercial PBM Markets and Vertical Integration of Health Insurers with PBMs: 2023 Update. Based on 2020 data and newly acquired 2021 data for people with a commercial drug benefit tied to a medical benefit and the PBMs used by insurers, the updated analysis presents market insight on five PBM services performed for insurers: rebate negotiation, retail network management, claim adjudication, formulary management, and benefit design. Insurers face a make-or-buy decision—they can perform these functions in-house or buy them from a PBM. The AMA Policy Research Perspectives report, “Competition in Commercial PBM Markets and Vertical Integration of Health Insurers with PBMs: 2023 Update”, found that insurers use a PBM for three of them—rebate negotiation, retail network management and claims adjudication—and therefore assessed market competition for those three product markets.

Social Determinants of Health (SDOH) refer to the conditions in the environments where people are born, live, learn, work, play, worship, and age that affect a wide range of health, functioning, and quality-of-life outcomes and risks. SDOH can be grouped into five key areas: economic stability, education access and quality, healthcare access and quality, neighborhood and built environment, and social and community context. Here are 5 strategies for employers to address social determinants of health:

• Promote Economic Stability: Employers can provide competitive salaries, offer financial wellness programs, and create opportunities for career advancement. Ensuring job security and offering benefits such as retirement plans can significantly improve the economic stability of employees.
• Enhance Education Access and Quality: Employers can invest in their employees’ education through tuition assistance programs, professional development opportunities, and on-the-job training. This not only helps employees advance in their careers but also contributes to their overall well-being.
• Improve Healthcare Access and Quality: Offering comprehensive health insurance, providing access to mental health resources, and organizing health and wellness programs can make a significant difference in employees’ health. Employers can also offer flexible work hours or telemedicine services to make healthcare more accessible.
• Support a Healthy Neighborhood and Built Environment: Employers can contribute to a healthy work environment by ensuring workplace safety, offering ergonomic workstations, and creating spaces that encourage physical activity, like gyms or walking trails. They can also support local initiatives that aim to improve community health and environmental conditions.
• Foster Social and Community Context: Creating a workplace culture that values diversity, inclusion, and social support can have a positive impact on employees’ mental health and overall well-being. Employers can organize community service activities, support local businesses, and encourage employee participation in social groups or clubs to build a sense of community.

By addressing these 5 strategies for employers to address social determinants of health, employers can not only improve the health and well-being of their employees but also contribute to a more productive and engaged workforce. If you collaborate with TransparentRx and opt for our Care Navigation services, we’re equipped to pinpoint factors influencing the health of our members. The Care Navigation team is dedicated to coordinating referrals to local service providers, ensuring a streamlined approach to healthcare management.

Pharmacy Benefit Managers: History, Business Practices, Economics, and Policy and other notes from around the interweb:

• Pharmacy Benefit Managers: History, Business Practices, Economics, and Policy. Pharmacy benefit managers evolved in parallel with the pharmaceutical manufacturing and health insurance industries. The evolution of the PBM industry has been characterized by horizontal and vertical integration and market concentration. The PBM provides key functions: formulary design, utilization management, price negotiation, pharmacy network formation, and mail order pharmacy services. Criticism of the PBM industry centers around the lack of competition, pricing, agency problems, and lack of transparency. Legislation to address these concerns has been introduced at the state and federal levels, but the potential for these policies to address concerns about PBMs is unknown and may be eclipsed by private sector responses.

• Copay Accumulators: Implications for PBMs and Health Plans After Court Strikes Down HHS Rule. The striking down of the 2021 HHS rule on copay accumulators represents a significant development that necessitates adaptation from health plans and PBMs, who will need to adjust their operations on not just copay accumulator programs, but also copay maximizers and potentially alternative funding programs (the most recent evolution of these copay adjustment programs), to align with the reinstated federal rule. This may involve revising policies and procedures to ensure compliance and communicating the changes in copay accumulator policies to members to ensure transparency and clear communication so that members understand their cost-sharing responsibilities. Additionally, health plans and PBMs may need to reevaluate their formulary and benefit design to accommodate the new regulatory landscape while continuing to provide cost-effective and quality care to patients.

• Pharmacy Benefit Manager Pricing for High Utilization Generic Drugs. The practice by pharmacy benefit managers (PBMs) of spread pricing—charging the client (i.e. insurer) a higher amount than is reimbursed to the pharmacy—has garnered substantial attention from policymakers. The bipartisan proposals in the PBM Transparency Act and PBM Reform Act and numerous state laws prohibit spread pricing. However, others in the pharmaceutical supply chain, such as pharmacies and wholesalers, also rely on spread pricing to earn profits. The gross profit for each entity in the supply chain remains unexplored in the literature. Using Medicare Part D data, this study analyzed entity-level gross profit in the pharmaceutical supply chain for high-utilization generic drugs.

• Competition in Commercial PBM Markets and Vertical Integration of Health Insurers with PBMs: 2023 Update. Based on 2020 data and newly acquired 2021 data for people with a commercial drug benefit tied to a medical benefit and the PBMs used by insurers, the updated analysis presents market insight on five PBM services performed for insurers: rebate negotiation, retail network management, claim adjudication, formulary management, and benefit design. Insurers face a make-or-buy decision—they can perform these functions in-house or buy them from a PBM. The AMA Policy Research Perspectives report, “Competition in Commercial PBM Markets and Vertical Integration of Health Insurers with PBMs: 2023 Update”, found that insurers use a PBM for three of them—rebate negotiation, retail network management and claims adjudication—and therefore assessed market competition for those three product markets.