The list of ways non-fiduciary Pharmacy Benefits Managers unfairly profit at the expense of employers and plan members is a long one -– from excessive drug mark-ups and spread pricing to retaining rebate revenue and limitations or charging for access to claims and cost data. A lack of transparency and systemic complexity have made it difficult for plan sponsors to identify conflicts of interest or unscrupulous pricing strategies.
Most worrisome: This is not new. The bright spotlight of the CAA has only begun illuminating the widespread prevalence of such conflicts of interest, and has placed the ultimate onus on plan sponsors – not PBMs – to uphold fiduciary standards (learn more about employer liability in our recent white paper).
Because PBMs themselves are not directly culpable for fiduciary violations under the CAA, many are likely to continue traditional processes lacking transparency and accountability. That makes it even more crucial for employers to recognize potential PBM biases and take immediate steps to ensure fiduciary compliance, or risk penalties and litigation.
Red Flags: Identifying a Fiduciary PBM vs. Non-Fiduciary PBM
One of the best means to avoid risks from CAA non-compliance is to work with a fiduciary Pharmacy Benefits Manager. There are significant distinctions between a fiduciary PBM, such as US-Rx Care, and a non-fiduciary PBM – and all of those differences come at a high cost to employers or their plan members.
Important to keep in mind is that a fiduciary PBM is not the same as “a transparent, non-fiduciary PBM”. Fiduciary is a term defined under ERISA that has legal meaning, while the term “transparent” leaves it up to the PBM to define what that means. For example, a PBM can have a transparent pricing model but still have conflicts of interest, such as owning the mail and/or specialty pharmacy. Similarly, PBMs that simply accept “claims fiduciary” roles are committing to process claims accurately, but not accepting full fiduciary responsibility.
Fiduciary PBM: Fully transparent administrative charges as the sole source of revenue to the PBM
VS.
Non-Fiduciary PBM: Hidden sources of revenue that drive up costs for the employer or plan members
Fiduciary PBM: The PBM does not own a retail, mail-order or specialty pharmacy, which would represent a conflict-of-interest
VS.
Non-Fiduciary PBM: May own a retail, mail-order or specialty pharmacy, and financially benefit from higher drug costs
Fiduciary PBM: Offers transparent pharmacy network pricing (with no PBM markup, spread pricing, or hidden profits)
VS.
Non-Fiduciary PBM: Pharmacy network pricing is not transparent, and often have PBM markups, spread pricing or other hidden profits
Fiduciary PBM:
Maintains 100% pass-through of all manufacturer revenue of any kind and by any definition
VS.
Non-Fiduciary PBM: Often retains a portion of rebates for their own profit versus passing the full value onto the plan sponsor
Fiduciary PBM: Employers have full ownership and access to claims data, which allows them to maintain total oversight of service providers and responsibly manage plan assets
VS.
Non-Fiduciary PBM: May not offer full, unredacted access to claim-level data or may charge plan sponsors to access claims history and cost data
Fiduciary PBM: Clinical guidelines and prior authorization criteria that are based strictly on national standards of care and proven best practices.
VS.
Non-Fiduciary PBM: Watered down, clinical guidelines and prior authorization criteria based on drug manufacturer incentives and corresponding manufacturer requirements that encourage utilization of high-cost medications over lower cost therapeutic equivalents.
Fiduciary PBM: Clinical guidelines and prior authorization criteria that are based strictly on national standards of care and proven best practices.
VS.
Non-Fiduciary PBM: Watered down, clinical guidelines and prior authorization criteria based on drug manufacturer incentives and corresponding manufacturer requirements that encourage utilization of high-cost medications over lower cost therapeutic equivalents.
Fiduciary PBM: Fully transparent administrative charges as the sole source of revenue to the PBM
VS.
Non-Fiduciary PBM: Hidden sources of revenue that drive up costs for the employer or plan members
Fiduciary PBM: The PBM does not own a retail, mail-order or specialty pharmacy, which would represent a conflict-of-interest
VS.
Non-Fiduciary PBM: May own a retail, mail-order or specialty pharmacy, and financially benefit from higher drug costs
Fiduciary PBM: Offers transparent pharmacy network pricing (with no PBM markup, spread pricing, or hidden profits)
VS.
Non-Fiduciary PBM: Pharmacy network pricing is not transparent, and often have PBM markups, spread pricing or other hidden profits
Fiduciary PBM:
Maintains 100% pass-through of all manufacturer revenue of any kind and by any definition
VS.
Non-Fiduciary PBM: Often retains a portion of rebates for their own profit versus passing the full value onto the plan sponsor
Fiduciary PBM: Employers have full ownership and access to claims data, which allows them to maintain total oversight of service providers and responsibly manage plan assets
VS.
Non-Fiduciary PBM: May not offer full, unredacted access to claim-level data or may charge plan sponsors to access claims history and cost data
Fiduciary PBM: Clinical guidelines and prior authorization criteria that are based strictly on national standards of care and proven best practices.
VS.
Non-Fiduciary PBM: Watered down, clinical guidelines and prior authorization criteria based on drug manufacturer incentives and corresponding manufacturer requirements that encourage utilization of high-cost medications over lower cost therapeutic equivalents.
The question facing many self-funded employers now is how to uphold fiduciary compliance, ensuring their plan acts solely in the interest of its participants – and that starts with avoiding existing PBM conflicts-of-interest.
Mitigating PBM Conflicts of Interest & Ensuring CAA Compliance
Managing pharmacy benefits and ensuring fiduciary standards are met is a difficult landscape for many employers to navigate. Historically, plan sponsors have relied on their PBM to oversee all aspects of plan management, and that responsibility, along with guarding against unscrupulous PBM profit tactics, has now shifted to the employers themselves.
Understand Your Fiduciary Responsibility
Ensuring compliance starts with understanding self-funded employers’ fiduciary obligations under the CAA. The legislation, which went into effect in December 2022, holds employers accountable to their fiduciary role, such as paying no more than “reasonable” fees to related services. That includes verifying that pharmacy benefits managers aren’t unduly profiting at the plan’s expense. Learn more about employers’ fiduciary responsibilities in this recent white paper.
Ensure Full Access to Plan Data
Without complete access to pharmacy benefits information, including claims and cost data, it’s difficult for employers to maintain full oversight of service providers and effectively manage plan assets. Start by verifying that your PBM contract provides for complete access to data; if it doesn’t, work toward resolving that as quickly as possible.
Implement Recurring Audit Processes
Regularly auditing your pharmacy benefits plan and your PBM contract can help identify potential areas of non-compliance, such as PBM mark ups on dispensed medications, hidden cost structures or unclear language even for basic items such as the definition of brand versus generic drug or the definition of manufacturer rebates. This process can also help you assess overall plan performance and evaluate opportunities for cost-savings or other improvements.
Partner with a Fiduciary PBM
One of the simplest actions employers can take to avoid CAA non-compliance is choosing to partner with a fiduciary pharmacy benefits manager like US-Rx Care. Working with a fiduciary PBM guarantees CAA compliance for self-funded employers, and ensures your pharmacy benefits plan offers the greatest value to plan participants as well. Learn more about how partnering with US-Rx Care can bring your organization and your employees significant cost savings on pharmacy benefits and simultaneously ensure CAA compliance by scheduling a consultation.
The Consolidated Appropriations Act of 2021 (CAA) is making major waves in the self-insured employer space, with a core focus on transparency and proper stewardship of employee benefit plans. However, for over a year, the CAA lay relatively dormant, with delays in enforcement and litigation — until Johnson & Johnson (J&J).
CAA Litigation Has Arrived — For Employers and Corporate Officers
The J&J lawsuit represents the first landmark in CAA litigation, with an unprecedented employee class action lawsuit against excessive prescription drug spending. Digging deeper, we find that J&J’s benefits consultant and pharmacy benefits manager (PBM) allegedly served as the primary drivers of these exorbitant pharmacy costs, preventing a fair and open RFP due to rampant conflicts of interest and hidden profits. The J&J suit is only the beginning — we’re already seeing several new lawsuits come to light as employers are now held accountable for the fiduciary non-compliance of their benefits vendors.
The story doesn’t stop there. Not only are companies as a whole on the hook for fiduciary obligations across their plans, but chief officers themselves are now personally held liable as well. CAA enforcement letters, released by the Centers for Medicare & Medicaid Services (CMS) with state-specific provisions, are now calling for thorough compliance investigations and, if necessary, enforcement action on both personal and enterprise levels.
Three Steps Employers Can Take to Root Out Non-Compliance
Recent legal action has made one thing clear: the CAA can no longer be ignored. Employers can no longer claim ignorance of CAA requirements if non-compliance is found, even among their benefits vendors and service providers. The question for many employers now is how to ensure fiduciary compliance with existing vendors, especially PBMs that coordinate drug pricing and administration between pharmacies, drug manufacturers, and health plans. Per the CAA, a plan sponsor’s fiduciary duty is to ensure the plan solely acts in the interest of its participants and beneficiaries.
How does this look in practice?
Demand alignment and transparency from every vendor and service provider that touches your pharmacy plan.
Certify that every vendor’s compensation is reasonable and holds no conflicts of interest that undermine the value of the plan.
Gain full access to your healthcare data to maintain total oversight over service providers and responsibly manage plan assets.
By comparing prescription drug cost trends and employee cost-sharing structures against manufacturer rebates and administrative fees, employers can identify how appropriately plan assets are being managed, as well as any sources of fiduciary non-compliance.
This process, however, is time-consuming and costly, and it grows even more complex when vendors do not embed fiduciary compliance from the start. That’s why more employers are partnering with a fiduciary PBM like US-Rx Care. When you know your PBM is fully compliant you can gain peace of mind that your pharmacy benefit plan is offering the most value to your participants without opening the door to corporate and personal legal action.
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:
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.
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.
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:
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.
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.
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.
Fiduciary pharmacy benefits organization US-Rx Care is proud to announce the addition of GoodRx to its national pharmacy network. GoodRx is one of the nation’s most recognizable providers of “cash discount” prices on prescription medications, used by millions of individuals throughout the U.S. annually. This relationship augments US-Rx Care’s own network pharmacy contracts to access GoodRx discounts in the event that the GoodRx price is better for a given drug on a given day at a particular pharmacy. This helps self-insured employers strengthen overall benefit value and provides the best possible care to their enrollees.
This unique savings opportunity automatically checks the GoodRx “cash price” discounts at the point of dispensing. Instead of searching on their own for additional savings through GoodRx, plan members can simply present their US-Rx Care health benefits card to the pharmacy, which will compare the US-Rx Care network rate with the GoodRx cash price. The member will always pay the lower amount and earn credit towards their deductibles and out-of-pocket maximums with no paperwork or reimbursement forms to submit. Through this integrated approach, US-Rx Care and GoodRx are working side-by-side to deliver the savings and quality of care that employers and enrollees both expect and deserve.
“As a fiduciary PBM, US-Rx Care puts the best interest of employers and their plan enrollees ahead of anything else,” said Renzo Luzzatti, US-Rx Care Founder and President. “By partnering with GoodRx, we continue to deliver on our fiduciary responsibilities by making it simple for employers to avoid conflicts of interest in their pharmacy plans and drive greater value for their plan enrollees.”
US-Rx Care maintains full contractual adherence to fiduciary duties, ensuring employers with self-sponsored health plans reduce wasteful spending and provide needed medical therapies to their plan members at the most affordable cost. Together, US-Rx Care and GoodRx are committed to enhancing price transparency and increasing flexibility for employer-sponsored pharmacy benefits. By eliminating hidden profits and deconflicting the complex processes within pharmacy benefits management, these two organizations now offer a more cost-effective, clinically responsible, and high-value pharmacy benefits solution.
About US-Rx Care
US-Rx Care is a fiduciary pharmacy benefits organization. We grew up in the health plan environment, working for and consulting to multiple Medicare, Medicaid, and commercial health insurers for over thirty years. At US-Rx Care, clients have access to proven pharmacy risk management programs and solutions that have consistently delivered 30%-50% reductions or more in pharmacy benefit spend for at-risk health plan sponsors. We have also assisted multiple plans achieve dramatic increases in HEDIS / Stars quality scores despite ever increasing thresholds to achieve a 5 star rating.
Building a high-value benefits plan is crucial for self-insured employers to control costs while improving employee satisfaction. However, this is easier said than done on the pharmacy side of healthcare benefits, as prescription drug costs continue to rise in response to a myriad of factors, including inflationary pressures, utilization, and, most notably, the conflicted PBM relationship characterized by hidden profits at the expense of plan sponsors and enrollees.1
Employers who self-sponsor their health plans take a front seat in their pharmacy benefit plan decisions, but selecting the right solution can be challenging due to binding contract terms and a lack of transparency from PBMs. That’s why clinical pharmacy organizations like US-Rx Care provide more than one option, allowing employers to choose the solution that best fits their needs while providing the highest value possible — whether it’s full pharmacy benefits management or behind-the-scenes utilization management.
Piece-Meal or Full-Service: Evaluating Pharmacy Benefits Solutions
Selecting the right pharmacy benefits solution depends on a number of factors, including existing vendor relationships, financial considerations, and overall goals for your pharmacy plan. Self-insured employers can select one of these two solutions:
Pharmacy benefits management. The full PBM model encompasses every service that touches the pharmacy benefit, including formulary management, claims processing, pharmacy network management, medication management, and specialty pharmacy services. This comprehensive approach provides an all-in-one solution to help employers streamline pharmacy benefits administration by keeping all prescription drug information in one place.
Utilization management. Instead of an all-inclusive solution, employers can leverage utilization management to establish a stronger clinical backbone within their existing PBM relationship. This solution focuses entirely on reviewing prescription drug claims through a clinical lens, with a team of healthcare professionals working to ensure members receive the best possible medication at the lowest available price. By targeting utilization patterns and promoting cost-effective prescribing practices, this solution aims to control pharmacy costs while ensuring appropriate medication utilization.
Maximize Savings and Satisfaction With a Fiduciary Partner
Despite best appearances, a PBM or utilization management organization will fail to provide optimal savings if they do not contractually adhere to fiduciary responsibilities — the same standards that self-insured employers are required to follow. A fiduciary partner like US-Rx Care can fundamentally transform an employer’s pharmacy benefit plan, leveraging a PBM or utilization management solution to unlock higher value and deliver maximum savings for both the plan and its enrollees.
The core difference between traditional and fiduciary PBMs is the ultimate goal of their efforts. Where traditional PBMs notoriously seek opportunities for profit, a fiduciary only works in the plan’s best interest, operating with full price transparency and eliminating every conflict of interest. By removing hidden profits from the equation, fiduciaries can negotiate lower prices, optimize formularies to only include the appropriate medications, and implement cost-saving strategies tailored to each employer’s plan needs.
Choose the PBM That Works For, Not Against, Your Plan
As a leader in the fiduciary PBM space, US-Rx Care has the clinical and pharmacy benefit administration expertise necessary to sharply cut the costs of needed prescription drugs. Our full PBM solution is proven to save up to 50% on pharmacy benefit costs in just 12 months for self-insured employers. Alternatively, employers who wish to keep their PBMs can carve out utilization management and prior authorization functions to our clinically-based Right Rx program. By advocating strictly for your enrollee’s best interest, Right Rx saves an average of $15-$25 per enrollee per month with over 30% or greater out-of-pocket savings for non-specialty, specialty, and J-code prescription drugs. Whether your organization is looking for partial or full pharmacy optimization, US-Rx Care has the tools and cost-saving frameworks in place to deliver the savings and plan value your enrollees deserve.
