UnitedHealthcare (UHC) has announced that beginning January 1, 2020, all discounts it receives from pharmacy benefits managers (PBMs) will be passed to the consumer at the point-of-sale for all fully-insured plans. In the initial rollout of this program to small employers, UHC said that average per-script costs were reduced by $130, so this will be a material change for some consumers. Now it will apply to all insured plans. This follows a similar announcement by CVS.
Recently, Cigna sent a communication to customers of its Express Scripts unit that not only would rebates be passed through, but they would also be passing through 100% of administrative fees paid to them by PBMs, directly to employers. Employers would then have to decide whether these should be passed through to consumers. These administrative fees amount to 7–10% of rebates and were designed as a way for insurance carriers to hold on to a piece of the compensation from PBMs where the employers demanded pass-through rebates. Sounds murky doesn’t it? Transparency is coming.
The big three PBMs: Express Scripts, Caremark and Optum, are feeling the heat and public outcry as Congress and consumers have begun to realize that up to 30% of drug cost has been kicked back in a non-transparent scheme that would be considered a “kick-back” if there wasn’t specific exemption from those rules. The federal government has proposed eliminating rebates from federally funded insurance plans, and legislation has been proposed to make all rebates illegal. The big three have heard and are getting ahead of it.
Now, employers who receive rebate payments need to hear it. Drugs will cost less at the point of sale and employers who are used to large rebates will have to adjust. This will especially affect high deductible plans where much of the savings will no longer be paid to the plan sponsor. Plans with copays will not be as significantly impacted since the loss of rebates will result in a corresponding reduction in claim costs. Overall patient cost sharing will be reduced which might make a change in premium cost sharing necessary to keep employer costs in line. Premiums for insured plans, and premium equivalents for self-insured plans, will be impacted by these changes – and by the decision of self-insured employers whether these rebates and administrative fees will be passed through as they will be for all insured plans. A little advance planning with your actuary is in order.