Employers pay 80%+ of commercial (non-Medicare/Medicaid) healthcare costs, yet are often disillusioned by their experience with a conventional volume-based pharmacy benefits arrangement. Their pharmacy costs have risen, yet their population isn’t healthier. They’ve received rebates, yet they haven’t saved money.
The PBM industry—a transaction-driven industry that highlights economic distribution, resting squarely on price, rebates, and discounts—has consistently let down employers and patients with models that behave like retail. And that’s the problem. Healthcare is fundamentally different than retail. There should be no disparities in access to pharmacy, and patients should receive the care that’s right for them. Volume-based models that pump more drugs into the population driven by “sophisticated” drug pricing models fail to improve the health of employees or lower employer costs. At the end of the day, the PBM profits regardless of outcomes.
25% of healthcare spend is waste, 40% of Americans have co-morbidities and are on multiple drugs, 22% of American adults between 40 and 69 are on 5 or more drugs. It’s clear the current approach to care management isn’t working. The solution? PBMs must return value to the healthcare discussion.
For too long PBMs have had nothing to offer besides alternate pricing models that steer a benefits conversation away from healthcare. Healthcare is the only business that is not judged on value, yet value is the ONLY measure of healthcare efficacy. A truly aligned and value-oriented model is one in which employer outcomes are directly related to benefit provider income.
Underserved populations, health equity, and population health management
A small percentage of patients have markedly higher healthcare complexity and need much greater care and attention. We have repeatedly heard healthcare economists talk about this. According to a 2021 report published by the Kaiser Family Foundation (KFF), 5% of Americans consumed 49% of all healthcare spending. That is just the spending number. 34% of that same cohort self-reported being in fair or poor health. Even at EmpiRx Health where I work, 2.6% of our patients consume approximately 45% of our services. Patients with healthcare complexity have a disproportionate set of healthcare needs and are getting lost in the mix, right when they need us the most.
While most PBMs continue to focus on driving a drug pricing conversation, care management in the industry has continued to be archaic, condition-oriented, and organized around rebatability and the PBM’s bottom line. Relying on a strength in numbers mindset, PBMs have continued to add clinical programs for more conditions while refusing to do anything different around the health of client populations and their patients with complex care needs. Employers have also been conditioned to accept that the PBM is offering more clinical programs and hence must be doing its job. While this is happening, the underserved find themselves even more on an island than ever before. The perfect recipe for healthcare inequity.
The fundamental challenge with care management in the PBM industry for 25+ years has been its condition-orientation and the approach has clearly not worked. Narrowing the focus to one dominant condition fails to address critical underlying social, behavioral, and physical co-morbidities that significantly increase clinical and financial risk. The optimal care model requires a tailored approach to population health management that accounts for both the overall risk profile of the employer as well as a longitudinal analysis of each patient within that population. By taking this population health management approach, PBMs have a unique opportunity to fill care gaps arising from treating only the most dominant condition, because they can provide the missing 360-degree patient view. With a value-based and pay-for-performance model, proactive health management is rewarded and there is no incentive to increase drug volume. PBMs are driven only to achieve defined clinical and financial metrics.
This shift in focus makes a tremendous difference. It gives PBMs a reason to invest in technologies and workflows to proactively care for the patient’s whole health—not just their dominant conditions. Pharmacists become active members of the patient care team engaging PCPs and other providers. Clinically appropriate treatment plans are optimized based on population health data and insights. By looking at the whole patient, PBMs can optimize utilization and enhance outcomes, all of which lower costs.
Take for example, two patients diagnosed with a chronic migraine condition prescribed the same high-cost injectable brand drug. In the conventional volume-based model, these prescriptions would be rubber stamped by the PBM or steered to a brand formulary alternative―whichever one that would generate the highest rebate for the PBM. Since clinical and financial results are the driver for a value-based approach, an employer should expect a PBM to go deeper on an Rx for high-cost injectable medication. If the PBM reviewed the patient profiles and discussed the cases with the prescribers, they might have found:
- Patient A experienced several doctor and ER visits, daily migraines, and trial and failure of preventives and rescue medications. Patient A’s condition aligned with the clinical guidelines for the prescribed injectable brand drug, and thus needed it. In this case, the prescribed drug was appropriately prescribed and dispensed.
- Patient B was newly diagnosed and had no previous treatment for migraines. The PBM’s pharmacist recommended an oral preventive medication available as a lower-cost generic which the prescriber agreed was the more clinically appropriate choice.
Both patients received the care that was right for them, and the employer saved thousands in drug spend as a result.
The output of a well-executed population health management strategy can reap major dividends in the pharmacy benefits space where results can be conclusively measured and monitored. This approach to population health is also congruent with the core philosophy of value-based healthcare which is about doing the right thing in an aligned manner across all pertinent stakeholders.
Employers are being convinced to give up healthcare access and innovative care models for their employees in favor of retail-like purchasing conversations with their conventional PBM of choice. By eliminating condition-based care management and utilizing a value-based, pay-for-performance model, the PBM industry can provide greater care, markedly improved access, and lowered costs. Only then will employers see real value.
Photo: Devrimb, Getty Images