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
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
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)
Non-Fiduciary PBM:
Pharmacy network pricing is not transparent, and often have PBM markups, spread pricing or other hidden profits
Maintains 100% pass-through of all manufacturer revenue of any kind and by any definition
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
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.
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.
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
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
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)
Non-Fiduciary PBM:
Pharmacy network pricing is not transparent, and often have PBM markups, spread pricing or other hidden profits
Maintains 100% pass-through of all manufacturer revenue of any kind and by any definition
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
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.
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.