Employers eye PBM changes, fearing legal threat

Tina Reed
October 29, 2024 - Axios

Employers worried about lawsuits from workers charging they're not spending their health care dollars wisely are increasingly casting a more critical eye on the middlemen that help manage their drug costs.

Why it matters: While the Biden administration and Congress turn up the heat on pharmacy benefit managers, corporate discontent could have a far bigger impact on the industry if the employers find alternate benefit arrangements.

Driving the news: More than half of 188 companies polled in September and October are considering a change to their PBM in one to three years, per a new survey from the National Alliance of Healthcare Purchasers.

• Companies weighing a change cited a desire for more transparent contracts and pricing, saying they need more visibility to ensure the PBM is making the right choices and complying with the law.
• It tracks with sentiment from other employer groups like the Business Group on Health, which found one-third of its 40 members have begun to switch or are considering switching PBMs.
• 88% are currently or are considering requiring a comprehensive definition of the term "rebate" in their contracts and 80% are currently or are considering the use of a value-based formulary versus a rebate-driven formulary in the next one to three years.

"The fact that it's so many, I think, is an indication of real concern and a feeling like they need to get better contracts and potentially better partners," Shawn Gremminger, CEO of the Alliance, tells Axios.

Zoom in: 86% said they already do or plan to have contracts that include full disclosure of all revenue streams with affiliated pharmacy-related entities within the next one to three years.

• The aim is to understand how PBM-owned rebate aggregators may obscure how much of the savings negotiated for a drug is passed on to the employer, Gremminger said.

• "That's the key that we're educating employers on ... making sure you're getting full rebate pass-through from the original purchase of the drug all the way through to you," Gremminger said.

The other side: Some of the largest PBMs dispute these characterizations completely.

• "Our pricing models have always been fully transparent to our clients, and to meet their evolving needs, we've continued innovating to offer them even greater simplicity and predictability," an Express Scripts spokesperson said in an emailed statement.
• A CVS Caremark spokesperson told Axios 99.7% of its clients renewed their commercial business for next year, with a recent TD Cowen report finding a 93% client satisfaction rate. "We are proud of how CVS Caremark safeguards American employers from drugmaker price gouging," he said.