|…I was under the impression PBMs already favored lower-cost generics?|
Express Scripts announced last week a new “formulary,” or list of covered drugs, that will favor lower-cost generic versions of the drugs rather than expensive, branded versions. Now its clients, including both health insurers and employer plans, can choose between lists that include drugs with a high list price — and high rebate to PBMs like Express Scripts — or the new list with lower-price drugs but with little or no rebate.
TransparentRx has favored lower-cost generics over higher cost brand drugs, regardless of rebates, for almost a decade! In fact, we’ve shunned potential business from employers who viewed rebates as “free” money and wanted to steer our formulary toward that end. It will be interesting to see if the conflicts of interests and misaligned incentives, some brokers and consultants benefit from, begin to dissipate in favor of putting the needs of members and employers first. It’s time we start measuring value across all stakeholders with radically transparent data and conversations.
Under the current model, drug manufacturers set a list price for their medications and negotiate a rebate off that price with PBMs in exchange for having their medicines placed on a list of covered and preferred medicines. Experts say it’s not always clear who gets the rebate, but part of it goes to employers or insurance companies while PBMs also keep a percentage. This model leads to higher costs for patients as drugmakers increase list prices to offset the cost of rebates.