Pharmacy benefit managers (PBMs) have long been controversial in U.S. healthcare. Prescription drug spending is one of the fastest-growing in the sector, with rising list prices of drugs being linked to rising rebates from PBMs.
The Drug Channels Institute estimates that three major pharmacy benefit managers — Express Scripts, CVS Caremark and OptumRx — control nearly 80% of prescription drug benefit transactions in the U.S.
Meanwhile, PBMs profit off of rebates and discounts, failing to pass on an estimated $120 billion back to consumers, according to research from Dr. Robert Goldberg of the Center of Medicine in the Public Interest.
A better model, the National Community Pharmacists Association (NCPA) suggests, is a flat-fee pricing model, where PBMs are paid only for services rendered. Some states have already proposed this.
And one startup is trying it out: Prescryptive Health, a blockchain-powered prescription data platform.
If you can’t beat them, join them
Prescryptive acts as a PBM, negotiating prices directly with pharmacies. That allows the company to maintain fair rates, co-founder and CEO Chris Blackley told Fierce Healthcare, and to be transparent about them with consumers.
Blackley takes issue with coupon programs, which, he says, depend on existing PBM contracts and take a cut of their fees while not being completely transparent with prices.
“The system is fundamentally broken,” said Blackley. “There’s a party that’s conspicuously missing—that's the consumer.”
Prescryptive calls itself a “pharmacy benefits model that requires no compromises,” something not every pharmacy can trust.
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“If you want to change the cost, you have to become a PBM,” Blackley said.
Through Prescryptive’s mobile patient engagement platform, MyRx.io, users can find and pay for clinical services at pharmacies, including COVID-19 tests and vaccines, and see what pharmacies in a given area charge for medications.
Prescryptive also offers recommendations to patients for potentially cheaper medication when a doctor from one of its PBM members sends a prescription via the electronic health record (EHR). The recommendations are algorithm-driven and have been analyzed by a clinical team. The process is updated any time there’s a new drug on the market or new research is released about existing ones, the company said. Its algorithm is also tailored to each patient depending on things like medication history, executives said.
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“Information asymmetry and lack of transparency at the counter before patients walk away has a direct impact on people,” Blackley said, noting that the latest abandonment rate for medications (PDF) at the pharmacy counter is 9%.
Prescryptive offers plans for self-insured employers, the bulk of its revenue, Blackley said, and it also charges pharmacies a transaction fee in some cases. The fee depends on the service and can cost up to $10.
Prescryptive is contracted with 50,000 pharmacies in the U.S., including mail-order, retail, specialty pharmacies and hospital systems. Some of the startup’s partners include major pharmaceutical companies, independent pharmacy groups and chains like Walmart and Walgreens. It’s also partnering with the state health departments of New York and Florida to report users’ COVID-19 test results.
The company recently announced a partnership with AssureCare, enabling medical billing capabilities for pharmacies.
Greg Lopes, assistant vice president of strategic communications at the Pharmaceutical Care Management Association (PCMA), defended traditional PBMs, telling Fierce Healthcare that the market is "highly diverse and competitive" and allows for "cost-effective services to clients."
PBM clients don't have to work with PBMs, he said, and if they choose to it's because they have a "proven track record of reducing prescription drug costs for patients."
Pharmacies have long disputed this, noting if they don't agree to the contract, they will lose a significant portion of patients.
Lopes highlighted PCMA findings that claim the number of independent pharmacies is growing, which contradicts NCPA findings and countless news reports of pharmacies struggling. He also emphasized pharmacy direct and indirect remuneration (DIR) fees are important quality control measures. Earlier this year, several pharmacy groups, including NCPA, filed a lawsuit against the Department of Health and Human Services to challenge these fees, which they claim are "clawbacks" that are "fundamentally dishonest."
Lopes also said that spread pricing, from which PBMs make millions, is not unique in the drug supply chain and claimed a client "always has the final say on contract terms." Some states already prohibit this practice, and a federal policy has been introduced targeting it as well.
Just this year, several investigations have been launched and more than 100 bills targeting secretive PBM business practices have been introduced, Morning Consult reported in August.
Shaking up the PBM market
Confluence Health, one of the largest providers in North Central Washington, started working with Prescryptive mid-2020. Prior to that, it had a contract with a major national PBM, the health system’s director of network strategy, Kristen Hankins, said. But that relationship was not working. Its rebate methodology was confusing, and it was difficult to engage with the PBM.
Hankins said Prescryptive came in with a more personalized touch that Confluence appreciated, flying out and meeting the team in-person. Having looked at the market in their region, the Prescryptive team understood Confluence’s pain points and areas of opportunity, she added. The integration with Confluence’s electronic medical records, which took about six months, also was a smooth process, Hankins said.
“They made it very easy, from the employer perspective,” Hankins said. Large national PBMs “don’t even know how to pronounce Wenatchee,” Hankins said, referring to the city Confluence is based in. She added that after implementation, Confluence got positive feedback from both its employees and other retail pharmacies that had similarly been frustrated with past PBM contracts.
Early on, Prescryptive examined Confluence’s existing formulary and compared that to what had been agreed upon under the previous PBM contract. The company discovered a lot of inconsistencies, Hankins said, and made recommendations on how to correct them. Now, Confluence receives timely feedback, quarterly reports on new business opportunities and analysis of its peers. Prescryptive’s clinical team also works with Confluence to discuss potential improvements to the formulary or clinical standards of care.
Pharmacists call for more transparency
When drug discount app GoodRx announced last month it’d be integrating with Surescripts, nearly 700 pharmacy owners and workers signed a letter arguing the deal did more harm than good for price transparency.
“Coupons help PBMs perpetuate their existence,” the letter said, and without them, “we would motivate further innovation around pricing and pricing reform.” It also said the deal would steer business away from already struggling independent pharmacies.
Kyle McCormick, who wrote the letter, owns Blueberry Pharmacy in Pittsburgh, Pennsylvania. It operates a cost-plus model, with the average price of its medications costing 33% less than what GoodRx offers, he said. It does not bill payers; all drugs are sold at a cash price, which is determined by the average drug acquisition cost.
"The [GoodRx-Surescripts] deal was touted as a move towards transparency; when in fact, coupon programs are bought and paid for by the same PBM-based, opaque pricing schema the deal claims to upend," the letter to Surescripts' board said.
GoodRx said in a statement to Fierce Healthcare that the integration with Surescripts supports its ability to offer transparent pricing information, as it brings that data to prescribers in addition to the information it provides to consumers.
"When a prescriber uses Surescripts Real-Time Prescription Benefit to prescribe a medication, GoodRx price information shows up for those without insurance or whose price information isn’t already available from their PBM or health plan," GoodRx said. "This increases transparency—allowing providers to make more informed decisions and address prescription cost concerns with patients at the point of care."
"Without this integration, prescribers would not have access to cost information for uninsured patients or patients whose benefit information isn’t available," the company added. "Being able to have transparent pricing discussions with a provider while you’re still in their office is invaluable to ensuring people can find affordable solutions."
The back-and-forth is a microcosm of the tension between PBMs and pharmacies. In McCormick’s view, PBMs should only exist in the brand and specialty drug market.
He believes that adding market forces to healthcare would drive down its cost. If every pharmacy were to switch to a cost-plus model, prices would be level across the board, he argued. With this open and transparent type of marketplace, the patient becomes the negotiator, and the need for PBMs and prescription savings programs is eliminated, McCormick said.
“If you empower a consumer, they’re likely to be a better shopper than anybody,” McCormick said.