How Fiduciary PBMs Are Solving Traditional Pharmacy Benefit Management Problems

For years, pharmacy benefits managers (PBMs) were left alone to oversee every part of a pharmacy benefits plan from behind the scenes. Without close oversight, PBMs manipulate pricing, contract terms, formularies, and pharmacy sourcing to their benefit. Fortunately, with recent changes to pharmacy regulation, PBMs are now under fire to answer for their many conflicts of interest and financial incentives they use to pad their bottom line. As a result, more self-insured employers and brokers are evaluating their contracts for these issues and exploring new options to protect the best interests of their plans.

Spotting the Gaps in Traditional PBM Models

Traditional PBMs, including the “Big Three”, have long been criticized for severely inflating the costs of prescription drugs and embedding conflicts of interest throughout the entire benefit. Boiling it down, these are the top three challenges we see in the traditional model:

1. Opaque pricing and rebates. Despite negotiating rebates and discounts with manufacturers, PBMs often pass little to none of these savings to the plan. Complex rebate structures and a lack of transparency about rebate distribution ultimately lead to consistent price hikes for needed prescription drugs, leaving plan sponsors unaware if their rebates are being used to lower pharmacy spend or funneled into PBM profits.
2. Spread pricing. The traditional PBM model often generates gaps in what the PBM charges the plan for a certain medication and how it reimburses the pharmacy — with the PBM extracting profits from the difference, or spread, between those two numbers. This hidden source of revenue can skyrocket drug costs and degrade plan value.
3. Lack of transparency. PBMs are notorious for a lack of transparency in how they manage a plan’s pharmacy benefit. This includes limited access to data around drug pricing, rebate distribution, and the fees included in the PBM contract. By keeping this data behind closed doors, traditional PBMs are not held accountable for how they manage pharmacy costs.

How a Fiduciary Partner Closes the Gaps

Standing in direct opposition to a traditional PBM is a fiduciary partner — a different type of PBM that is now a requirement for self-insured employers, per the Consolidated Appropriations Act of 2021.¹ The fiduciary PBM model represents a fundamental shift in pharmacy benefits administration, shifting the focus from maximizing PBM profits to optimizing client outcomes, both clinically and financially, by:

1. Prioritizing plan interests. By definition, a fiduciary must hold a deep commitment to promoting the best interests of the plan only. Unlike traditional PBMs, fiduciaries align their solutions with the goals of each employer, eliminating conflicting incentives due to rebates, spread pricing, and other sources of hidden revenue. A fiduciary’s formulary management strategies are solely based on clinical efficacy and cost-effectiveness, ensuring that the best interests of the plan sponsor and enrollees are always top of mind.
2. Ensuring cost transparency. Instead of keeping employers away from their utilization data, fiduciaries disclose all costs associated with managing the entire pharmacy benefit. Employers receive regular, detailed information about what the plan paid for each medication, including how manufacturer rebates and PBM fees were used. By providing 100% transparency, fiduciary PBMs help plan sponsors understand exactly how plan assets are utilized, helping employers budget accurately and make informed decisions to enhance plan value.
3. Delivering equitable benefits. Prioritizing the best interests of the plan with complete transparency naturally provides equitable benefits to each enrollee. By focusing on how to best meet clinical needs with cost-effective practices, fiduciary PBMs help plan sponsors make needed medical therapies affordable and accessible to their enrollees, driving better outcomes at a lower cost. This patient-centric approach not only enhances quality of care but also drives consistent, measurable reductions in pharmacy spend.

With a fiduciary partner like US-Rx Care, you can deliver the best of both worlds: richer benefit value at a lower cost. Learn more about how US-Rx Care’s fiduciary PBM solutions can safeguard your organization against predatory PBM practices to reduce pharmacy spend up to 50% or more in the first 12 months.

Sources

1. Consolidated Appropriations Act, 2021 (CAA). (2024, January 26). U.S. Centers for Medicare & Medicaid Services. https://www.cms.gov/marketplace/about/oversight/other-insurance-protections/consolidated-appropriations-act-2021-caa