Evolving PBM Pricing Models – What Does it Mean to Be Transparent?

The pharmacy benefit management (PBM) industry is continuously evolving to keep pace with a dynamic pharmaceutical landscape, ongoing regulatory changes, and shifting payer and patient expectations around transparency in PBM business practices.

But what is transparency in pharmacy? And how will increasing it benefit you and your clients? Here’s how different stakeholders are answering the call for greater transparency and how you can determine which options deliver the most value.

The Importance of Transparency in PBM Practices

Historically, PBM operations have been somewhat opaque, with details of drug pricing negotiations, rebate arrangements, and the criteria for formulary inclusion often kept confidential. A report by Maynard Nexsen shows the growing demand for transparency in PBM, noting that 94 percent of plan sponsors expressed dissatisfaction with the level of transparency in traditional contracts.

Greater transparency in PBM practices benefits all stakeholders:

• Pharmacies better understand reimbursement rates and the criteria to join or remain in a PBM’s network.
• For payers, transparency leads to more predictable drug spending and ensures they get fair value for expenditures.
• For patients, the benefits of clear, transparent PBM practices include lower drug costs and improved patient outcomes.

The push for transparency began with demands for clearer contracting practices and more detailed reporting requirements. Now, the focus is on transparent pricing models that link the cost of a drug more directly with what payers are actually spending on those drugs.

Alternative PBM Options and Market Disrupters

Traditional pharmacy benefit management pricing models involve a mix of spread pricing and rebate arrangements with drug manufacturers that are not always passed on to payers or patients. In contrast, new PBM players have introduced pricing models prioritizing transparency and simplicity.

Non- “Big 3” PBMs

While the “big 3” PBMs dominate the conversation and the market – CVS Caremark, Express Scripts, and OptumRx manage 80 percent of all prescription claims – they have a fair amount of competition. Many smaller PBMs tout greater flexibility, more tailored support, and 100 percent transparency – something they claim the vertically integrated PBMs simply cannot deliver.

Mark Cuban Cost Plus Pharmacy

Mark Cuban founded Mark Cuban Cost Plus Drugs to “disrupt the drug industry” and help “end ridiculous drug prices.” Cost Plus Drugs offers a clear-cut cost-based pricing model – they charge a fixed 15 percent markup on the actual cost of a drug plus a $5 dispensing fee and $5 shipping fee. Their drug list includes more than 2,500 generic medications and now includes select specialty medications, including Yusimry, a biosimilar to the blockbuster anti-inflammatory biologic, Humira.

Amazon RxPass

Amazon Pharmacy created RxPass, a subscription service that allows customers to fill prescriptions for a wide range of generic medications at a fixed monthly rate of $5, bypassing traditional insurance and PBMs altogether. The program currently offers more than 50 medications and continues to add to that list.

Major Healthcare Organizations Are Making the Move

Last year, one major health plan and one health system each announced strategic partnerships with an alternative PBM option – specifically, Mark Cuban Cost Plus Drugs:

It will be interesting to see what kinds of savings Blue Shield of California and CHS achieve and if additional healthcare organizations and larger payers will follow in their footsteps.

Evolving Strategies from the “Big 3” PBMs

CVS Health, Express Scripts, and OptumRx have also introduced new pricing and reimbursement strategies aimed at increasing transparency.

As PBM pricing models evolve, plan sponsors and consultants must carefully evaluate new arrangements to ensure they deliver the strategic value you expect. To do that effectively, you need real-time data and the ability to automate your analytics for timely information that will inform your decisions.

Fostering Transparency with Real-Time Data and Analytics

Xevant is at the forefront of fostering transparency within the PBM industry. By offering solutions designed for PBMs, consultants, employers, and health plans, we help ensure effective management, monitoring, and optimization of pharmacy benefits with clarity and insight.

• Consultants can analyze vast amounts of data to advise their clients on optimizing PBM strategies.
• Employers and health plans benefit by gaining insights into how their PBM is performing, ensuring that they get the best possible value and that their members can access affordable medications.
• Clients can monitor their PBM’s performance to ensure transparency and cost savings.

Our platform addresses the complex needs of the PBM ecosystem, providing tools that enable real-time analytics, benchmarking, and automated reporting.

How can Xevant help you navigate plan benefit options and increase transparency? Ask us.