Fighting Pharmacy Inflation

There is an inherent battle between employers and their pharmacy benefit managers. Simply put, PBMs get paid on the volume of drugs dispensed and have little incentive to control utilization of expensive medication. Even worse, drug rebate allocations skew incentives even more when PBMs or health plans use rebate sharing to enhance profits.

Consider this: the doctor tries a medication based upon clinical data which he or she may have seen in a recent study. There is little sensitivity to cost as compared to an alternative treatment – after all, paying for it is the last of the doctor’s thoughts. The patient just wants to get well and also has little incentive to shop for price. And the PBM, that is compensated based upon the volume of drug prescribed and the value of rebates retained, is more than happy to comply. Pharmaceutical industry studies and direct-to-consumer advertising hype up these new medications.

Another example of waste can be found in new oncological biomedical delivery systems, which are used to treat cancer without harming healthy cells. Doctors try the drug, often prescribing a full month’s supply. If the tumor doesn’t respond after a week the excess medication, which may have cost thousands of dollars, is tossed. The patient doesn’t care, doctor doesn’t care, the PBM makes more and the employer is left with the bill.

We have been discussing these new costly specialty medications with clients for years now and we are about to see the PCSK9 inhibitor explosion. The typical PBM provides 6 months of this medication without the requirement of clinical reevaluation. At up to $14k per year, this costly drug should be a last resort and should be monitored closely for clinical effectiveness. But, I can see the progression clearly. Too many patients will be lured to the drug.

With aligned incentives, drug formularies, quantity limits, prior authorization and step therapy can all be effective. However, patients and their doctors are very vocal about any restrictions and as a result the pushback to employers is fervent – and without these requirements the cards are stacked. In order to control costs, the system must be rebuilt to effectively address rising costs. There is too much financial conflict in pharmacy. Transparency and outcomes-based reimbursement are taking hold – hopefully quickly enough to make a difference.

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