Tuesday, September 21, 2021

Tip of the Week: What is spread pricing, and how does it affect a PBM’s revenues?

Knowing which factors influence revenues for commercial health plans and pharmacy benefit managers (PBMs) helps health insurance brokers and PBM consultants provide the right mix of solutions to their customers. But deciphering annual reports and financial statements can be tricky if you’re not a CFO. What’s more, these resources rarely provide a complete picture of a PBM’s revenue model.

How important are rebates to a health plan’s or PBM’s bottom line? How do commercial plans earn revenue on premiums? What is spread pricing, and how does it affect a PBM’s revenues? You can find the answers to these and other questions in our recent webinar, “Benefits of Working with a Fiduciary-Model PBM.” This off-the-shelf webinar recording explains the main sources of PBM revenue and key expenses for health plan sponsors. 

And for the short term, payer financials may be especially challenging to decipher, given the impact of COVID-19. For example, many health insurers have reported strong earnings because they have had to pay fewer claims, as patients have delayed care or canceled elective procedures. Whether this trend holds as the country faces additional surges is unclear.

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