Tuesday, April 21, 2020

Tuesday Tip of the Week: A PBM Proposing Anything Short of Full Disclosure is a Non-Starter

If you are unable to win full disclosure from a PBM, just walk away. Don't be swayed by the PBM proposal with the biggest AWP discounts, rebate guarantees or low dispensing fees and even lower admin fees. There is a price to pay later if you choose to believe the optics in any proposal that doesn't include full disclosure. A person who follows my newsletter and works for a large pharmaceutical manufacturer wrote this to me in an email not to long ago.

"Super commentary about the State of Ohio. We have had numberous debates internally about how purchasers are asking for transparency vs just the lowest price. Contract nomenclature often obscures the real price. We get asked often about direct contracting between manufacturer and employer. Lots of barriers but conceptually something that needs to be considered and they [employers] are not asking for a lower net price vs the PBM...just better optics!"

In 2018, Ohio's Attorney General, Dave Yost, learned PBMs earned nearly $225 million through spread pricing between April 2017 and March 2018 while operating in Ohio Medicaid. As a result, the state canceled all PBM contracts in Medicaid that used spread pricing.

AG Yost announced a four-part proposal and called for quick action from the state’s legislature to shine a bright light on PBM contracts and cut down on hidden cash flows. Yost’s proposal calls for:

1) Drug purchases in the state to be conducted under a master PBM contract that is administered by a single contact point

2) Ohio’s Auditor of State to have full power to review all PBM contracts, purchases and payments

3) The state to prohibit nondisclosure agreements on drug pricing

4) PBMs must be fiduciaries

The truth does not reveal itself simply because a PBM says it is transparent or pass-through. Non-fiduciary PBMs know what you want to see in proposals and hide what you need to see in them. The spreadsheet can be a distraction if you allow it to be. As a self-funded employer, your truth lies in the PBM contract language.

The thing is, assessing PBM transparency is more effectively done by a trained eye. Someone who knows the ins and outs of PBM revenue models, contract loopholes and has personal knowledge of the employer's plan goals. Most employers don't know what they don't know so check the ego at the door.

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