What tools do PBMs use?
The total costs and utilization of specialty drugs will have a substantial impact on overall health care costs during the next decade. To address these challenges, payers rely on pharmacy benefit managers (PBMs) to manage the use of, and payment for, specialty drugs. PBMs offer a variety of tools to manage specialty drugs, including the use of specialty pharmacies. In doing so, the quality and continuity of care patients receive is improved, while ensuring that they derive the greatest value from their medications.
PBMs manage prescription drug plans that include specialty drugs for more than 266 million Americans who have health insurance through a variety of sponsors, including commercial health insurers, self-insured employers’ plans, union plans, Medicaid, and Medicare plans. As such, PBMs are an essential partner to these payers in the health care system.
Over the next ten years, PBMs and specialty pharmacies will save payers and patients an estimated total of $250 billion on the cost of specialty medications and related non-drug medical costs when compared to what expenditures would be with limited use of PBMs and specialty pharmacies.
PBM tools that have been used for years in the small-molecule drug categories to control costs are continuing to be successfully leveraged in the specialty drug category. The continued use of these cost-saving tools will be essential as PBMs and payers work to manage expenses and enable access to these innovative drugs.
Medication Utilization Tools
PBMs employ a number of strategies and tools to support the needs of patients who are prescribed specialty drugs (as well as their health care providers) while controlling costs for health plans. PBMs have developed key strategies to maintain access to high-quality care while ensuring that money spent on specialty drugs is not wasted. These strategies include:
Reducing waste and improving adherence: PBMs use drug utilization review (DUR) to reduce waste such as poly-pharmacy and implement patient adherence programs to help patients stick to their prescription regimens. Both programs improve clinical outcomes, as well as control prescription expenditures.
Encouraging use of lowest-cost drug option: PBMs use several tools to encourage the use of the lowest-cost drug option. These include formularies, tiered cost sharing, prior authorization, step therapy protocols, generic incentives, consumer education, and physician outreach.
Offering more affordable pharmacy channels: PBM-managed mail service and specialty pharmacy channels typically give plan sponsors deeper discounts than retail pharmacies. These channels also help encourage the use of preferred, lowest-cost drug products for additional savings.
Negotiation tools PBMs use include:
Negotiating rebates from drug manufacturers: Rebates are a form of discount that are contractually negotiated between the manufacturer, who is primarily motivated by the opportunity to gain market share, and the PBM, who requires the manufacturer to return some of the money paid for the product. These rebates allow the PBM to provide savings to its payer clients and patients.
Negotiating discounts from drugstores: Pharmacies agree to discounts in order to participate in a plan’s specialty pharmacy network. The more selective the network, the greater the discount, since each pharmacy will benefit from increased business.
Specialty Pharmacy Tools
In managing the use of specialty drugs, PBMs rely on high-quality and affordable specialty pharmacies. Other tools PBMs use to support the needs of patients, health care providers, and health plan sponsors in the use and management of specialty drugs include:
- Formulary management
- Drug access and utilization management
- Adherence and compliance programs
- Site of care optimization
- Clinical outcomes monitoring
- Limited specialty pharmacy networks
- Management of the pharmacy and medical benefits
- Value and outcomes-based payment models
Scientific advances and innovation in specialty pharmacy will accelerate in the coming years, adding to the arsenal of cures and beneficial treatments for a wide range of conditions. To ensure patients can fully benefit from these new treatments while limiting unnecessary costs to the system, PBMs in conjunction with specialty pharmacies will continue to develop and employ tools to navigate this evolving field.
Comprehensive management approaches that effectively balance patient care, outcomes, and cost are helping ensure that new, innovative medications are readily available and affordable to the patients who need them most. Through the use of specialty pharmacies, utilization management tools, adherence and compliance programs, and preferred specialty pharmacy networks, PBMs are providing a superior level of service to patients, providers, and payers.
These services better align what payers and patients pay for a therapy with the value it is intended to deliver. This in turn makes therapies more affordable and accessible for all patients and preserves plans’ ability to cover new, more costly medications.
State or federal laws and regulations that place restrictions on PBMs’ ability to manage specialty drugs and specialty pharmacy networks could substantially increase prescription drug costs, thus affecting patients, employers, and health plan sponsors in every state.
Resources & References
- Video: What is a pharmacy benefit manager? Express Scripts. October 8, 2015.
- Pharmacy Benefit Managers (PBMs): Generating Savings for Plan Sponsors and Consumers. Visante. Sept 2011.
- Pharmacy Benefit Managers (PBMs): Tools for Managing Drug Benefit Costs, Quality, and Safety. Health Policy Alternatives. 2003.
- Lotvin, A. M., Shrank, W. H., Singh, S. C., Falit, B. P, & Brennan, T. A. Specialty medications: Traditional and novel tools can address rising spending on these costly drugs. Health Affairs. 2014; 33 (10): 1736-1744.
- Hirsch, B. R., Balu, S., and Schulman, K. A. The impact of specialty pharmaceuticals as drivers of health care costs. Health Affairs. 2014; 33 (10):1714-1720.
- White Paper: The Management of Specialty Drugs. sPCMA. February 2016.