The 340B Drug Pricing Program, designed to provide discounted medications to healthcare organizations serving vulnerable populations, has long been a point of debate within the pharmaceutical industry. While its intent is noble, the ripple effects of 340B on commercial contracts are significant and complex, warranting a closer examination. Understanding the impact of the 340B program on commercial contracts is essential for navigating the complexities of the U.S. pharmacy reimbursement and distribution system.

The Basics of 340B

The 340B Program requires drug manufacturers to provide outpatient drugs at reduced prices to eligible healthcare organizations, known as covered entities. These entities include hospitals, community health centers, and clinics that serve many uninsured or low-income patients. The savings from these discounts are intended to support the covered entities’ ability to provide care to underserved communities.

Commercial Contracts and 340B: The Intersection

While the 340B Program is primarily aimed at supporting public health objectives, its impact on commercial contracts cannot be overlooked. Pharmaceutical manufacturers and commercial payers are increasingly scrutinizing the program’s influence on drug pricing dynamics and contract negotiations. This scrutiny stems from the fact that 340B pricing can distort the traditional market mechanisms that govern commercial drug pricing.

Key Impacts:

1. Price Differentials and Contracting Challenges:
   • One of the most significant impacts of 340B on commercial contracts is the creation of price differentials. Manufacturers are required to offer steep discounts under 340B, often leading to substantial differences between 340B prices and those negotiated in commercial contracts. This disparity can complicate negotiations between manufacturers and commercial payers, as the latter may seek to leverage 340B pricing in their contracts, potentially leading to lower reimbursement rates.
2. Shift in Market Dynamics:
   • The expansion of the 340B Program has also led to changes in market dynamics. Covered entities may purchase drugs at 340B prices but dispense them to insured patients, including those with commercial insurance. This practice, known as “spread pricing,” allows covered entities to benefit financially from the difference between the 340B acquisition cost and the higher reimbursement rates from commercial insurers. While this can provide financial relief to covered entities, it also introduces complexities in commercial contracting, as payers attempt to address the potential for inflated drug costs.
3. Contractual Safeguards and Compliance:
   • As the influence of 340B on commercial contracts grows, manufacturers and payers are increasingly incorporating safeguards and compliance measures into their agreements. These may include clauses that adjust reimbursement rates based on the covered entity’s 340B status or provisions that require transparency in how 340B savings are utilized. The goal is to ensure that the 340B Program’s benefits are aligned with its original intent without inadvertently undermining commercial contracting integrity.

Navigating the 340B Landscape

For stakeholders in the pharmaceutical industry, understanding the nuances of the 340B Program is crucial for effective contract negotiation and management. As the program continues to evolve, manufacturers and payers must remain vigilant in assessing its impact on pricing strategies and commercial relationships.

Best Practices:

• Transparency: Ensuring transparent communication between manufacturers, payers, and covered entities can help mitigate the potential for conflict and misaligned incentives in commercial contracts.
• Adaptive Contracting: Contracts should be flexible enough to adapt to the changing landscape of the 340B Program, including adjustments for price differentials and compliance requirements.
• Collaboration: Engaging in collaborative discussions with all stakeholders involved in the 340B ecosystem can lead to more equitable solutions that balance the program’s public health goals with the financial realities of the commercial market.

Conclusion

The 340B Drug Pricing Program, while a critical tool for supporting healthcare organizations serving vulnerable populations, has far-reaching implications for commercial contracts in the pharmaceutical industry. As the program continues to shape the market, stakeholders must navigate the challenges and opportunities it presents with a strategic and informed approach.

Three Things That Employer Health Plan Sponsors Should Do When the New MHPAEA Rules Are Published and other notes from around the interweb:

• 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.

• Prescription Rebate Guarantees: Employer Insights. This study sheds light on employers’ perspectives of rebate guarantees, dependency upon rebate dollars, and the role that pharmaceutical rebates or employer benefits consultants play in their pharmacy benefits manager (PBM) selection. The common occurrence of rebate guarantees in the study sample raises concern given that rebate guarantees may obscure employer visibility into the actual net prices of drugs, resulting in formulary inclusion of higher-cost products and higher overall total pharmacy costs. Employers should consider the role of employer benefits consultants in presenting drug contracting options and, ultimately, PBM selection. It is important to keep the employer perspective in mind when considering reforms to the current rebate-centric incentives of pharmacy benefit management.

In the intricate world of pharmacy benefits, few topics are as controversial and impactful as DIR (Direct and Indirect Remuneration) fees. These fees, often buried within the fine print of PBM contracts, have far-reaching consequences that can significantly affect the financial health of self-funded employers. As a CHRO or CFO, understanding DIR fees and their implications is crucial to managing your organization’s pharmacy benefit strategy effectively.

What Are DIR Fees?

DIR fees are post-sale adjustments that PBMs (Pharmacy Benefit Managers) apply to the payments they make to pharmacies. Initially introduced as a way to capture rebates or discounts that weren’t accounted for at the point of sale, DIR fees have evolved into a complex and often opaque mechanism that PBMs use to claw back funds from pharmacies long after a prescription has been filled.

For pharmacies, this means that they might receive a payment for dispensing a medication, only to have a portion of that payment reclaimed by the PBM months later. This practice not only adds a layer of uncertainty to pharmacy revenue streams but also indirectly inflates drug costs for plan sponsors like your organization.

The Financial Burden on Employers

While DIR fees were originally intended to reduce overall drug costs by ensuring pharmacies are reimbursed fairly, the reality has been quite different. These fees often increase the out-of-pocket costs for your employees and inflate the overall spend of your pharmacy benefit plan. The lack of transparency surrounding DIR fees makes it challenging for employers to understand the true cost of their pharmacy benefits, leading to budgeting difficulties and unexpected financial strains.

For CFOs, the impact is clear: DIR fees contribute to the rising cost of providing healthcare benefits to employees, which can strain your organization’s financial resources. For CHROs, the implications are just as significant. Higher out-of-pocket costs and increased premiums can lead to dissatisfaction among employees, potentially affecting retention and recruitment efforts.

Legal Precedents and Employer Protections

Recent legal developments highlight the growing scrutiny of DIR fees and the efforts to protect plan sponsors and pharmacies from their detrimental effects. A notable case involved Frier Levitt, a law firm that secured a landmark $22 million trial victory against Caremark. This case recovered 100% of DIR fees, interest, and attorney fees on behalf of an independent pharmacy. The ruling underscored the importance of transparency and fair dealing in PBM contracts, setting a precedent that could benefit plan sponsors who are vigilant in managing their pharmacy benefit arrangements.

This victory is a reminder to employers that they are not powerless in the face of PBM practices. By carefully reviewing and negotiating PBM contracts, and potentially pursuing legal action when necessary, employers can protect their financial interests and ensure that their pharmacy benefit plans are truly serving their employees.

What Can CHROs and CFOs Do?

To mitigate the impact of DIR fees, CHROs and CFOs should:

1. Demand Transparency: Ensure that your PBM contracts clearly outline how DIR fees are calculated and applied. Full transparency allows you to better understand the true cost of your pharmacy benefits.
2. Conduct Regular Audits: Periodically review your pharmacy benefit plan’s performance and financials to identify any discrepancies related to DIR fees.
3. Consider Alternative PBM Models: Explore working with fiduciary-model PBMs that prioritize transparency and align their interests with those of your organization.
4. Stay Informed on Legal Developments: Keep abreast of the latest legal cases and rulings related to DIR fees, as they can inform your strategies and negotiations with PBMs.

Understanding and managing DIR fees is not just about controlling costs—it’s about ensuring that your organization’s pharmacy benefit plan is fair, transparent, and truly beneficial for your employees. By taking proactive steps, CHROs and CFOs can safeguard their organizations against the hidden costs and financial risks associated with DIR fees, ultimately creating a more sustainable and equitable benefits strategy.

3 Trends Reshaping Pharmacy Benefits Management and other notes from around the interweb:

• 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.

• Prescription Rebate Guarantees: Employer Insights. This study sheds light on employers’ perspectives of rebate guarantees, dependency upon rebate dollars, and the role that pharmaceutical rebates or employer benefits consultants play in their pharmacy benefits manager (PBM) selection. The common occurrence of rebate guarantees in the study sample raises concern given that rebate guarantees may obscure employer visibility into the actual net prices of drugs, resulting in formulary inclusion of higher-cost products and higher overall total pharmacy costs. Employers should consider the role of employer benefits consultants in presenting drug contracting options and, ultimately, PBM selection. It is important to keep the employer perspective in mind when considering reforms to the current rebate-centric incentives of pharmacy benefit management.

• FTC Releases Interim Staff Report on Prescription Drug Middlemen. The Federal Trade Commission published an interim report on the prescription drug middleman industry that underscores the impact pharmacy benefit managers (PBMs) have on the accessibility and affordability of prescription drugs. The interim staff report, which is part of an ongoing inquiry launched in 2022 by the FTC, details how increasing vertical integration and concentration has enabled the six largest PBMs to manage nearly 95 percent of all prescriptions filled in the United States. This vertically integrated and concentrated market structure has allowed PBMs to profit at the expense of patients and independent pharmacists, the report details. “The FTC’s interim report lays out how dominant pharmacy benefit managers can hike the cost of drugs—including overcharging patients for cancer drugs,” said FTC Chair Lina M. Khan. “The report also details how PBMs can squeeze independent pharmacies that many Americans—especially those in rural communities—depend on for essential care. The FTC will continue to use all our tools and authorities to scrutinize dominant players across healthcare markets and ensure that Americans can access affordable healthcare.”

In the complex landscape of healthcare, designing a robust Pharmacy Benefit Management (PBM) program is essential not only for controlling costs but also for reducing fraud, waste, and abuse (FWA) while ensuring optimal patient outcomes. Designing a pharmacy benefit management program to reduce FWA and improve patient outcomes demands careful planning and strategic implementation. The following tips will guide you in crafting a PBM program that aligns with these goals.

1. Adopt a Fiduciary PBM Model

Choosing a PBM partner that operates under a fiduciary model is the first step toward reducing FWA. Fiduciary PBMs, like TransparentRx, are legally obligated to act in the best interests of their clients. This model eliminates hidden fees and conflicts of interest, ensuring transparency in pricing and decision-making. By aligning the PBM’s incentives with your organization’s goals, you can reduce unnecessary costs and focus on improving patient care.

2. Implement Rigorous Audit Processes

Regular audits are a cornerstone of any effective PBM program. By implementing comprehensive, systematic audit processes, you can identify and address potential instances of FWA early. This includes reviewing pharmacy claims for unusual patterns, verifying the accuracy of rebates, and ensuring compliance with formulary guidelines. These audits should be conducted regularly and be detailed enough to catch even subtle discrepancies.

3. Leverage Data Analytics

Harnessing the power of data analytics can significantly enhance your ability to monitor and prevent FWA. Advanced analytics can identify unusual prescription patterns, detect fraud, and optimize drug utilization. By analyzing data from multiple sources—claims, patient outcomes, and pharmacy behavior—you can gain a holistic view of your PBM program’s performance and make data-driven decisions to improve efficiency and patient outcomes.

4. Establish Strict Formulary Management

Formulary management is crucial in reducing FWA and ensuring that patients receive the most effective treatments. By creating a well-structured formulary that prioritizes clinically proven, cost-effective medications, you can limit the use of unnecessary or overpriced drugs. Regularly review and update your formulary to reflect the latest clinical guidelines and market changes. This approach not only reduces costs but also improves patient outcomes by ensuring access to the most appropriate therapies.

5. Enhance Medication Adherence Programs

Medication adherence is directly linked to patient outcomes. Implementing programs that encourage patients to follow their prescribed treatment plans can reduce hospitalizations, prevent complications, and lower overall healthcare costs. Consider strategies such as personalized patient education, automatic prescription refills, and reminders to take medication. Additionally, working with pharmacies that offer adherence support services can further enhance patient engagement and outcomes.

6. Integrate Value-Based Contracting

Value-based contracting is an innovative approach that ties payment to patient outcomes rather than the volume of prescriptions. By integrating value-based contracts with manufacturers and providers, you can incentivize the use of treatments that deliver the best outcomes for patients. This model encourages the selection of therapies based on their clinical effectiveness and cost-efficiency, ultimately reducing FWA and improving patient care.

7. Promote Specialty Drug Management

Specialty drugs represent a significant portion of pharmacy spending and are often targets for FWA. Effective specialty drug management requires a focus on prior authorization, step therapy, and the use of specialty pharmacies that offer clinical support. By implementing these strategies, you can ensure that patients receive the right specialty medications at the right time while controlling costs and preventing misuse.

8. Educate and Empower Patients

Patient education is a powerful tool in reducing FWA and improving outcomes. Educate patients about the importance of medication adherence, the potential risks of using non-formulary drugs, and the benefits of generic alternatives. Empower them to ask questions and make informed decisions about their treatments. An informed patient is less likely to fall victim to fraud and more likely to experience positive health outcomes.

9. Collaborate with High-Performance Networks

Partnering with a network of high-performance pharmacies and providers can enhance your PBM program’s effectiveness. These networks are typically more vigilant about adhering to best practices, which can reduce FWA. They also tend to offer higher-quality care, leading to better patient outcomes. Ensure your PBM program includes provisions for collaborating with these networks to maximize the value of your pharmacy benefits.

Conclusion

Designing a PBM program that effectively reduces fraud, waste, and abuse while improving patient outcomes requires a comprehensive approach. By adopting a fiduciary model, implementing rigorous audits, leveraging data analytics, and focusing on value-based care, you can create a program that not only controls costs but also delivers high-quality care to your patients. Remember, the ultimate goal of any PBM program should be to support the health and well-being of your members, and these strategies will help you achieve that.

Class action against Wells Fargo and other notes from around the interweb:

• Here we go again: Class action against Wells Fargo alleges fiduciary breach and mismanagement of prescription drug plan. Wells Fargo is now the second of many expected and anticipated class action suits against employers for breach of fiduciary duties with respect to their health plans. As previously stated, plaintiff law firms have been investigating several large employers as to whether they are acting in the best interest of their plan participants, exercising care and prudence with respect to the selection of service providers and administration of their plans, and ensuring that plan costs are reasonable. There’s no time better than the present for plan sponsors to ensure they are minimizing risk, following their fiduciary obligations, and stepping up their oversight. Action steps include considering the formation of a health and welfare benefits committee to monitor ERISA benefits, including the selection of service providers, reviewing contract terms, ensuring appropriate value for the price, and monitoring service providers and aggregate costs.

• Understanding the debate over PBMs. As policymakers seek to stem rising drug costs, they have focused closely on the role of Pharmacy Benefit Managers. PBMs contend they help to make prescription drugs more accessible and affordable. However, the industry has evolved in ways that make it difficult to evaluate their actual impact on cost. Critics point to vertical integration, pharmacy steerage, and lack of pricing transparency, and recent media stories have fueled this debate by highlighting cases where a participant can purchase a specific drug for less if they don’t use their prescription drug benefits. Employers are concerned both about prescription drug costs, which are rising faster than other medical plan costs, and about their fiduciary responsibility to members.

• Prescription Rebate Guarantees: Employer Insights. This study sheds light on employers’ perspectives of rebate guarantees, dependency upon rebate dollars, and the role that pharmaceutical rebates or employer benefits consultants play in their pharmacy benefits manager (PBM) selection. The common occurrence of rebate guarantees in the study sample raises concern given that rebate guarantees may obscure employer visibility into the actual net prices of drugs, resulting in formulary inclusion of higher-cost products and higher overall total pharmacy costs. Employers should consider the role of employer benefits consultants in presenting drug contracting options and, ultimately, PBM selection. It is important to keep the employer perspective in mind when considering reforms to the current rebate-centric incentives of pharmacy benefit management.

• FTC Releases Interim Staff Report on Prescription Drug Middlemen. The Federal Trade Commission published an interim report on the prescription drug middleman industry that underscores the impact pharmacy benefit managers (PBMs) have on the accessibility and affordability of prescription drugs. The interim staff report, which is part of an ongoing inquiry launched in 2022 by the FTC, details how increasing vertical integration and concentration has enabled the six largest PBMs to manage nearly 95 percent of all prescriptions filled in the United States. This vertically integrated and concentrated market structure has allowed PBMs to profit at the expense of patients and independent pharmacists, the report details. “The FTC’s interim report lays out how dominant pharmacy benefit managers can hike the cost of drugs—including overcharging patients for cancer drugs,” said FTC Chair Lina M. Khan. “The report also details how PBMs can squeeze independent pharmacies that many Americans—especially those in rural communities—depend on for essential care. The FTC will continue to use all our tools and authorities to scrutinize dominant players across healthcare markets and ensure that Americans can access affordable healthcare.”

The Consolidated Appropriations Act (CAA) has introduced a range of regulatory changes impacting various sectors, including self-funded health plans. While these changes aim to enhance transparency and protect consumers, they also bring significant responsibilities for plan sponsors and administrators. For self-funded plans, navigating the Consolidated Appropriations Act and complying with these new provisions is crucial to avoid potential pitfalls.

Key Provisions of the CAA

The CAA includes several key provisions that directly affect self-funded health plans:

1. Transparency Requirements: One of the most significant changes is the requirement for increased transparency. Plans must now disclose detailed pricing information, including the cost of prescription drugs and negotiated rates with healthcare providers. This transparency aims to empower plan members with better information about their healthcare costs and choices.
2. No Surprises Act: The No Surprises Act, a component of the CAA, protects members from unexpected medical bills. It limits out-of-network charges for emergency services and non-emergency services provided by out-of-network providers at in-network facilities. For self-funded plans, this means renegotiating contracts and adjusting plan designs to ensure compliance and minimize unexpected costs.
3. Mental Health Parity: The CAA strengthens mental health parity requirements, ensuring that coverage for mental health and substance use disorders is no less favorable than coverage for physical health conditions. Self-funded plans must review their mental health benefits to ensure they meet these new standards.
4. Plan Reporting and Disclosure: Enhanced reporting and disclosure requirements now mandate that self-funded plans provide more comprehensive information about plan operations and financials. This includes details on claims and the impact of any cost-sharing arrangements. Accurate and timely reporting is essential to comply with these requirements and avoid penalties.

Implications for Self-Funded Plans

The implementation of these provisions presents both challenges and opportunities for self-funded plans:

• Compliance Costs: Adhering to the new transparency and reporting requirements may involve additional administrative costs. Plans may need to invest in new systems or processes to gather and report the required data accurately.
• Operational Adjustments: To comply with the No Surprises Act and mental health parity requirements, self-funded plans may need to renegotiate contracts with providers, update plan documents, and adjust benefit structures. These changes can be complex and time-consuming but are necessary for compliance.
• Enhanced Member Experience: On a positive note, the increased transparency and protection against surprise bills can enhance the member experience. Providing clear, upfront information about costs and coverage can lead to better decision-making and increased satisfaction among plan members.

Steps to Take

To effectively navigate the changes brought by the CAA, self-funded plans should consider the following steps:

1. Review and Update Plan Documents: Ensure that plan documents reflect the new requirements, including transparency and mental health parity provisions.
2. Invest in Compliance Tools: Consider investing in technology or consulting services to manage the increased reporting and transparency requirements.
3. Communicate with Members: Keep plan members informed about the changes and how they may affect their coverage and costs. Clear communication can help manage expectations and reduce confusion.
4. Monitor Legislative Developments: Stay updated on any further legislative or regulatory changes that may impact self-funded plans. Proactive monitoring can help in adjusting strategies and ensuring ongoing compliance.

Conclusion

The Consolidated Appropriations Act introduces significant changes that self-funded plans must address to remain compliant and provide value to their members. By understanding the key provisions and taking proactive steps, plan sponsors can navigate these changes effectively and enhance their plan’s performance and member satisfaction.

Why Attend: Unlocking the Secrets of PBMs will share valuable insights into the intricacies of Pharmacy Benefit Managers (PBMs) and learn strategies to effectively navigate their profit tactics. This webinar is designed to equip you with the knowledge and tools to optimize pharmacy benefits management, reduce costs, and improve patient outcomes.

Who Should Attend:

• Vendors
• Brokers
• Consultants
• Human Resources Managers
• Chief Financial Officers

Topics Covered:

• Understanding the role and influence of PBMs in the healthcare ecosystem
• Identifying common profit tactics used by PBMs
• Strategies to mitigate hidden costs and improve transparency
• Best practices for contract negotiations with PBMs
• Case studies and real-world examples of successful PBM management

When: Second Tuesday of every month at 2PM ET

Join Us! Don’t miss this opportunity to enhance your understanding and capabilities in managing pharmacy benefits by attending Unlocking the Secrets of PBMs.

REGISTER HERE!

Prescription Rebate Guarantees and other notes from around the interweb:

• Prescription Rebate Guarantees: Employer Insights. This study sheds light on employers’ perspectives of rebate guarantees, dependency upon rebate dollars, and the role that pharmaceutical rebates or employer benefits consultants play in their pharmacy benefits manager (PBM) selection. The common occurrence of rebate guarantees in the study sample raises concern given that rebate guarantees may obscure employer visibility into the actual net prices of drugs, resulting in formulary inclusion of higher-cost products and higher overall total pharmacy costs. Employers should consider the role of employer benefits consultants in presenting drug contracting options and, ultimately, PBM selection. It is important to keep the employer perspective in mind when considering reforms to the current rebate-centric incentives of pharmacy benefit management.

• Delaware paid over $12 million more on weight loss drugs than expected, trend increases to follow. The body in charge of state employee health insurance plans — the State Employee Benefits Committee (SEBC) — is now preparing to vote on new trend increases after ending the year in a $10 million deficit. The Office of Management and Budget transferred the state’s GHIP $7.3 million to help cover the plan’s fiscal year 24 deficit, but as the new fiscal year begins, the SEBC is leaning towards being less conservative when deciding on new trend increases in medical and pharmacy claims to avoid repeating this year’s shortfalls. The SEBC already committed to raising state employee health insurance premiums by 27% for FY25, which started July 1, 2024. The FY24 deficit is largely due to underestimating the rising cost of prescription drugs, the utilization of bundled surgery rates and the growing popularity of weight loss drugs known as GLP-1s. The state’s pharmacy benefit manager projected the state would pay $2 million for GLP-1s in FY24. By the end of the fiscal year in June, the state had paid over $14 million for GLP-1s for weight loss purposes and close to $24.7 million for diabetes treatment.

• FTC Releases Interim Staff Report on Prescription Drug Middlemen. The Federal Trade Commission published an interim report on the prescription drug middleman industry that underscores the impact pharmacy benefit managers (PBMs) have on the accessibility and affordability of prescription drugs. The interim staff report, which is part of an ongoing inquiry launched in 2022 by the FTC, details how increasing vertical integration and concentration has enabled the six largest PBMs to manage nearly 95 percent of all prescriptions filled in the United States. This vertically integrated and concentrated market structure has allowed PBMs to profit at the expense of patients and independent pharmacists, the report details. “The FTC’s interim report lays out how dominant pharmacy benefit managers can hike the cost of drugs—including overcharging patients for cancer drugs,” said FTC Chair Lina M. Khan. “The report also details how PBMs can squeeze independent pharmacies that many Americans—especially those in rural communities—depend on for essential care. The FTC will continue to use all our tools and authorities to scrutinize dominant players across healthcare markets and ensure that Americans can access affordable healthcare.”

• The Leap to Self-Insurance. Health insurance, like any insurance, is about pooling risk and paying premiums to create some financial cushion against costly events. For years, though, many large employers — what constitutes large means varies, but it’s typically 500 or more employees — have self-insured, meaning they have taken on the responsibility of setting funds aside to pay healthcare claims instead of a health insurer. In other words, they act as their own insurer, although they often hire a health insurer as a third-party administrator (TPA) to process claims and to take advantage of that insurer’s provider networks. Under the Employee Retirement Income Security Act of 1974 (ERISA), companies that self-insure are exempt from state health insurance mandates. ERISA exemption means those large employers can offer the same benefit package to their far-flung workforces working and living in different states and very likely save money by not covering some of the state-level health insurance benefits.

In the dynamic landscape of employee benefits, pharmacy benefit management (PBM) plays a pivotal role in both cost management and employee health outcomes. HR should become experts in pharmacy benefit management (PBM) because it is now essential, not optional. Here’s why:

1. Cost Control and Savings

Pharmacy benefits can constitute a significant portion of overall healthcare expenses. By understanding the intricacies of PBM, HR professionals can make informed decisions that lead to substantial cost savings. This involves negotiating better terms with PBMs, understanding rebate structures, and implementing cost-effective formulary management strategies.

2. Fiduciary Responsibility

HR professionals have a fiduciary duty to act in the best interest of their employees and the organization. By becoming PBM experts, they can fulfill this responsibility more effectively. They can ensure that the PBM services chosen are truly beneficial and not just superficially attractive. This fiduciary approach builds trust with employees, knowing their best interests are being looked after.

3. Improved Employee Health and Productivity

An effective PBM strategy ensures employees have access to necessary medications without undue financial burden. When employees can afford their prescriptions, they are more likely to adhere to their medication regimens, leading to better health outcomes. Healthy employees are more productive, take fewer sick days, and contribute more effectively to the organization.

4. Navigating Regulatory Compliance

The healthcare sector is heavily regulated, with frequent updates that can impact pharmacy benefits. HR professionals who are well-versed in PBM can navigate these regulations effectively, ensuring compliance and avoiding costly penalties. Staying ahead of regulatory changes also positions the company as a responsible and compliant employer.

5. Leveraging Data Analytics

Advanced PBM systems generate a wealth of data that can provide insights into drug utilization patterns, costs, and employee health trends. HR professionals with PBM expertise can leverage this data to make strategic decisions, optimize benefit plans, and predict future healthcare needs.

6. Bridge the Expectation Gap

Employee benefit brokers and PBCs (PBM consultants) often lack broad PBM expertise or maintain conflicts of interest, which can lead to suboptimal choices for organizations. HR professionals who are experts in PBM can bridge this expectation gap. By having a deep understanding of PBM, HR can critically evaluate the advice and services offered by brokers and consultants. This ensures that the organization’s PBM strategy is aligned with its goals and not influenced by potential conflicts of interest. Being informed enables HR to demand transparency and accountability, leading to better outcomes for both the organization and its employees.

7. Strategic Decision-Making

Knowledge beyond fundamental ideas and principles that underpin pharmacy benefits management empowers HR professionals to make more informed and strategic decisions about their organization’s healthcare plans. They can better evaluate PBM proposals, understand the implications of various contract terms, and choose the best options for their organization. This strategic oversight can lead to significant cost savings and improved employee satisfaction.

Conclusion

Becoming experts in pharmacy benefit management empowers HR professionals to drive significant value for their organizations. From cost savings and employee satisfaction to improved health outcomes and regulatory compliance, the benefits are multifaceted. As the role of HR continues to expand, so too should its expertise in critical areas like PBM, ensuring a holistic approach to managing employee benefits.

How to Become an Expert

The best way to gain expertise in pharmacy benefit management is to become a Certified Pharmacy Benefit Specialist (CPBS). The CPBS program provides comprehensive education on the intricacies of PBM, covering everything from cost management and regulatory compliance to strategic plan design and data analytics. By earning this certification, HR professionals can:

• Gain a deep understanding of PBM mechanisms and best practices.
• Enhance their ability to negotiate and manage PBM contracts effectively.
• Stay updated on the latest industry trends and regulatory changes.
• Improve their ability to design benefit plans that optimize costs and employee health outcomes.

Investing in CPBS certification not only equips HR professionals with the necessary skills and knowledge but also positions them as trusted advisors within their organizations. This expertise enables them to make informed decisions that benefit both the company and its employees, ultimately leading to a healthier, more satisfied workforce.

In the ever-evolving landscape of healthcare and employee benefits, becoming a CPBS-certified expert in pharmacy benefit management is a strategic move that can drive significant value and ensure long-term success.