Wednesday, May 23, 2018

Trump’s Drug Blueprint Could Alter PBM Contracting

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With much fanfare, President Donald Trump's administration recently released a 44-page blueprint for executive action on drug pricing titled American Patients First. The blueprint proposes steps to end drug manufacturers' "gaming" of the regulatory process and to create incentives for pharmaceutical companies to lower list prices. The proposals regarding pharmacy benefit manager (PBM) firms, in particular, could affect drug costs covered by employer-sponsored group health plans.

The blueprint, however, also asks whether PBMs should be obligated to act solely in the interest of those for whom they manage drug benefits. If PBMs were identified as plan fiduciaries, they would be accountable for negotiating in the best interest of the plan and its members. This could certainly change the dynamics of current PBM relationships and, if adopted, keep PBMs from accepting certain types of payments from manufacturers that favor coverage of higher-cost drugs.

Tyrone's Commentary:

For all intents and purposes, there are only two types of PBM business models; non-fiduciary and fiduciary. Don't be fooled by labels such as pass-through, transparent, limited fiduciary (a new one) or others. I'm often asked what's the difference between a transparent and fiduciary PBM. Here is the big difference. A fiduciary PBM is required to act in its clients' best interest first for every action it takes on behalf of that client. In other words, the fiduciary PBM is contractually obligated to contain its clients cost. Any other PBM model regardless of what they tell you is not contractually obligated to contain costs. They are intentionally trying to avoid this responsibility so don't let them off the hook!

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