Over the past two years, the global pandemic created significant changes in how we address access to and utilization of healthcare services. Implementing solutions to these evolving challenges can be costly. In fact, the Office of the Actuary at the federal Centers for Medicare and Medicaid Services (CMS) recently reported that U.S. healthcare spending rose to over $4 trillion in 2020 – the largest growth since 2002. And prescription drug spending alone increased 3% to $348.4 billion in 2020.
Pharmacy benefit managers (PBMs) are essential intermediaries between insurance providers and pharmaceutical manufacturers in the U.S. drug supply chain. In light of rising health care costs, PBMs are increasingly scrutinized for their role in high prescription drug costs and the lack of transparency around their revenue streams. Governments have launched probes into prescription drug prices at the federal and local levels, and plan sponsors and their members are seeking greater transparency, accountability and affordability from PBMs.
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So what will the pharmacy benefit world look like in 2022? Will costs go down? Will PBMs take a more accountable and transparent approach to their pricing models? Here’s three forecasts that will impact the PBM industry this year.
- Alternative PBM models will be in the spotlight.
The vast majority of PBMs have used a traditional contracting approach for years, which often includes hidden revenue streams for PBMs that drive up costs for plan sponsors. While traditional PBMs offer volume discounts and high rebates, they may retain spread compensation from pharma revenue on rebates, discounts and incentives. Spread pricing occurs when a PBM charges the plan sponsor more than they pay the pharmacy for a medication.
More plan sponsors and government entities are rejecting this rebate-driven approach and demanding alternatives. Pass-through pricing models offer greater transparency into PBMs’ financial and operational processes, where 100% of rebates and discounts received are passed back to the plan sponsor. Spread is not involved from any pharmacy dispensing channel, so the plan sponsor is billed the same amount the pharmacy is paid. This approach makes prescriptions more affordable by taking the unnecessary costs out of pharmacy benefits, resulting in an overall lower net-cost.
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A growing number of policies aim to remove rebates altogether to make prescription drug costs more affordable, however pass-through PBMs are less likely to be negatively impacted because they tend to be smaller, privately-held organizations. In today’s uncertain environment, plan sponsors want stability. They will increasingly consider partnerships with alternative PBMs for pass-through contracts that allow them to move confidently into the year ahead and regain control of their drug spend.
- Preventing fraud, waste and abuse will be a top priority.
Drug fraud, waste and abuse (FWA) is a significant yet challenging problem in health care. Fraud is when someone knowingly uses false information or statements to improperly obtain payment for prescription drugs. Waste occurs when there is overutilization of services that result in unnecessary costs. Abuse includes actions that may result in unnecessary or increased payment for prescription drugs. FWA drains resources and diverts billions of dollars away from patient care annually.
Telehealth expansion amid the pandemic created new opportunities for FWA, such as conducting fake virtual medical visits so unscrupulous providers bill for expensive equipment or testing. These potential channels for committing FWA have raised concerns among plan sponsors, making FWA prevention and management programs a top priority for 2022. PBMs will place greater emphasis on their roles in protecting the assets of plan sponsors and reducing the overall cost of prescription drugs by preventing, detecting and investigating FWA.
- Managing specialty drug costs will drive down pharmacy spend.
Specialty drugs are the fastest-growing area of pharmacy spend, accounting for nearly half of total drug spend. Specialty medications offer new hope for a growing number of patients with complex or chronic medical conditions, but at a high cost. Over the next ten years, however, 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.
Plan sponsors are looking to adopt a comprehensive approach to address the rising costs of specialty drugs while still improving the quality and continuity of care that their members receive. When it comes to managing specialty drug costs, more plan sponsors will rely on PBMs to help them navigate pricing strategies to improve their bottom line.
Pharmacy benefits have never been more top of mind as the pandemic raised new concerns about medication access and supply. The current landscape heading into 2022 will keep pharmacy benefits under the microscope. Plan sponsors will evaluate their PBM’s pricing model to determine if their contract will deliver predictable costs, more opportunities for increased savings and improved care for their members.
Photo: Devrimb, Getty Images,
As President and CEO, David Fields provides enterprise leadership and strategic direction for Navitus to drive its continued growth. David collaborates with the executive management team to maintain Navitus’ strategic plan and to develop and direct its goals, policies and execution. Prior to joining Navitus, David served as President of Dean Health Plan and also served as Executive Vice President of Markets at Blue Shield of California. He has previously held executive roles at Aetna, Coventry, Anthem and Humana. David began his career as a CPA, providing auditing services for publicly traded hospital and insurance clients.
David has held leadership positions on a number of boards, including the American Heart Association, American Red Cross, Labor-Management Council and the National Conference of Christians and Jews. He earned a degree in accounting from the University of Louisville and has completed executive education at Duke University and Harvard University.
