Transparent PBMs are shaking up the pharmacy world by putting clients' interests first and ditching the sneaky pricing tactics of traditional PBMs. Unlike traditional PBMs, they’re all about honesty, giving you full access to pricing details with no surprises. With standout examples like SmithRx and EHIM, they're making drug prices clear and saving your plan money!
When it comes to sky-high drug prices, it's easy to point the finger at big pharmaceutical companies. After all, they are the ones developing and selling the medications. What people often don’t know is that the true culprits are Pharmacy Benefit Managers (PBMs). We explain this in more detail in our post “Are you sure you know your PBM? ”
This issue is exacerbated by the lack of competition in the industry where the three largest PBMs (CVS Caremark, Optum Rx, and Express Scripts) control 80% of the market. While the government is finally stepping in and proposing bills to aid the severity of this issue, the progress is not fast enough to impact the biggest PBMs anytime soon. So instead, the remaining 20% are taking matters into their own hands, creating a subset of transparent PBMs that are operating with integrity, prioritizing the financial well-being of their clients, and already seeing promising results. For instance, the transparent PBM SmithRx reports that their clients save up to 20% on pharmacy costs, showing that with the right incentives, PBMs still can positively impact drug pricing.
As a self-insured employer or benefits consultant, it's crucial to understand this shift. Thus, in this post, we'll explore what makes transparent PBMs different from traditional ones and highlight specific PBMs that exemplify what the industry should strive to be.
Let’s dive in!
From the outside, transparent PBM’s are just like the traditional ones. They negotiate discounts and rebates with pharmacies and drug manufacturers to secure lower prices for their clients. The key difference lies in their revenue model.
Compared to more traditional PBM’s, transparent PBMs only generate revenue through administration fees, eliminating the main cost drivers– spread pricing and rebate retention. This means that they pass on all negotiated discounts and rebate arrangements to their clients resulting in the decrease in pharmacy spend as reported by SmithRx.
We are so excited about what these PBMs are doing! So much so that we had to jump on the transparency bandwagon with our transparent TPA services. You know what they say, if you can't beat 'em, join 'em!
We also illustrate this in the diagrams below using the example of our fictional company CoolClaim. As you can see, under the transparent PBM model, the PBM does not charge CoolClaim any hidden fees, generating revenue solely from the agreed upon $10 administration fee. By this, CoolClaim saves $40 compared to the traditional PBM model!
Of course, critics could say that the changes in the PBMs’ revenue models could be all talk, no substance. How can clients be sure that they are truly reaping the benefits promised by their PBM?
This is where transparency comes into play. Transparent PBMs provide their clients with full access to their pricing structures, fees, and rebate arrangements, including the details of any rebates negotiated with drug manufacturers. They provide this data in real time so that their clients have an up to date understanding of their healthcare expenditures at all times. This means no hidden fees or sneaky pricing tricks!
When it comes to tricks, complete transparency also helps clients make more independent cost-effective prescription choices. With transparent PBMs, they won't be tricked into including more expensive drugs in their plan just so the PBMs can earn higher rebates. Instead, they will be able to choose a formulary that is truly the best fit for their employees in terms of accessibility and quality. It's a win-win situation where transparency leads to trust, better health outcomes, and cost savings!
There is one thing that we need to clear up before we continue. You might have noticed that, while some sources use "transparent PBMs" and "pass-through PBMs" interchangeably, we have not done that a single time.
The reason?
Transparent and pass-through are not the same. In fact they differ in the services they offer which is important to understand, especially if you are considering working with one.
Pass-through PBMs focus on lowering their client’s pharmacy costs by ensuring that 100% of negotiated discounts and rebates go directly to the patient. Transparent PBMs take it a step further. Not only do they pass all pricing benefits to their clients, but they also offer complete access to their financial and pricing structures.
Think of transparent PBMs as the upgraded version of pass-through PBMs, providing full visibility and accountability along with the cost-saving benefits. So, before you make your move towards cutting pharmacy costs, make sure you know exactly who you're hiring to maximize your savings and transparency!
Transparent PBMs certainly make a compelling case for themselves, but with so many options out there, how do you choose the right one?
There's no one-size-fits-all answer, as different PBMs will align better with different client goals and requirements. Yet, to help you kickstart your transparent cost savings journey, we highlighted a few PBM’s that we think are worth checking out (we’re not paid to say any of this, we’re just sharing what we know). These PBMs not only meet the high standards of transparency but also deliver impressive results in reducing pharmacy costs.
See for yourself!
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Website: https://www.ehimrx.com/
EHIM is a great option for clients looking for a personalized service. EHIM works with each of their clients to create a custom formulary to help them achieve their goals in the most efficient way. Other PBMs tend to have a set formulary. EHIM also offers a specialty drug solution, “EHIM Cares”, as a part of their services that detects specialty drug savings opportunities, provides more robust criteria for managing specialty medications and offers patients 24/7 nursing and pharmacy support. ________________________________________________________________________________________________________________________________________________________________
PCA Rx describes itself as a "full-service PBM that delivers a flexible, high-touch benefit", and they are not wrong! On top of their transparent formulary and pharmacy network management, they also offer medical claim audit services to help their clients monitor instances of medication duplication and offer therapy management services that help patients maximize their medication benefits.
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SmithRX are committed to their 100% pass through revenue model that, based on their reports, saves plan sponsors 20% on their pharmacy benefit costs. They also emphasize the importance of customer experience which reflects in their 99% customer retention rate.
And there you have it!
Although small, transparent PBMs are proving to be a powerful player in the industry, turning it on its head with their clear and straightforward approach to managing pharmacy benefits. We hope that in the future this will become the new standard in the industry, yet for that we need to remain patient.
In the meantime, we highlighted some standout examples that are leading the charge and showing what’s possible when PBMs prioritize their clients’ needs. So, as you explore your options, keep these top contenders in mind or let us know and we can help!
Contact the TrueClaim team to learn more!
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