A recent report in the Detroit Free Press highlighted some of the risks involved in using PBMs’ full suite of services.
“According to the Henry J. Kaiser Family Foundation, a California organization that studies health care costs, benefit managers boost market share in two major ways: adding drugs to the list of medicines employers pay for and encouraging doctors to use those drugs, even if they are more expensive. The more sales grow, the more drug companies pay the benefit managers.”
This practice results in significantly higher prescription drug costs for employers, because much of the costs associated with pharmacy benefits lie in a company’s formulary.
What is a formulary and how does having one save money?
The Academy of Managed Care Pharmacies describes a formulary as “a continually updated list of medications which represent the current clinical judgment of physicians and other experts in the diagnosis and treatment of disease and preservation of health. The primary purpose of the formulary is to discourage the use of marginally effective drugs and treatments.”
A formulary is more than just a list of drugs. It is instituted and managed by a Pharmacy and Therapeutics (P&T) Committee, often comprised of pharmacists, physicians, benefit plan managers and other allied health professionals in and around the community. The committee has the expertise to help physicians decide which drugs should be utilized while maintaining high-quality patient care.
Some organizations have the resources to analyze their prescription benefit and pull their formulary in-house to have better control over which drugs are available to their employees and physicians. This saves money, but most employers need to rely on someone else to manage their benefits.
There are other options. Many health insurers have the resources and the know-how to institute and manage their own formularies, which results not only in significant cost savings for members but can also help ensure drug safety and efficacy.
Managing a formulary is key because of the continuous influx of new drugs in the market. Each drug must be thoroughly reviewed and clinically proven to be 1) clinically effective; 2) safe; and 3) cost-effective. Many health insurers promote the use of proven generics whenever possible. This reduces costs and promotes safety.
PBMs, on the other hand, can offer services that can be helpful to a health insurer.
- Provide broad access to a national network of pharmacies
- Process claims efficiently and cost-effectively
When used in this capacity, PBMs can help control costs and allow health insurers to concentrate on providing other services to their customers.
If your health insurer uses a PBM, there’s no need to panic you aren’t necessarily at the mercy of secret deals and designer drugs. First, verify that your insurer has its own formulary overseen by an internal P&T committee. Second, ask how your insurer uses its PBM.
Third, a good health insurer is always available to answer your pharmacy questions. Your insurer and PBM may actually be keeping your crew healthy and your cargo light.
Steve Marciniak, R.Ph., is director of pharmacy services at Care Choices, a nonprofit health care organization and a subsidiary of Trinity Health. Care Choices HMO is ranked first in Michigan in clinical excellence in health plans, according to the National Committee for Quality Assurance.