The Transparency Debate

The transparency and disclosure of pharmacy benefits is one of the most widely discussed topics in health care benefit management today. Employers are being faced with the challenge of finding a prescription drug program that offers participants high quality, cost effective care that can counter the devastating effects of rapidly rising drug costs. There is a shouting match going on between pharmacy benefit managers (PBMs) and pharmacy benefit administrators (PBAs) over who can manage these cost increases best, leaving employers scratching their heads over which option is right for them.

Questions, Questions, Questions

The major questions that arise regarding PBMs and PBAs are: How much savings from rebates are being passed on to employers? What are the administration fees? What contractual agreements with pharmaceutical manufacturers are they bound to? How do these contracts limit choice and savings? How much control does an employer have in the administration of the program?

These questions and countless others concerning the transparency of the pharmacy benefits industry need to be answered in order for employers to trust PBMs and PBAs.

PBMs Under Fire

Many call for increased PBM transparency because of the concern that the contracts they have with pharmaceutical manufacturers and the subsequent rebates they receive may conflict with their customers' goals of offering employees the best possible drug coverage at the lowest price. And since generic drug manufacturers often don't offer rebates some feel PBMs are prone to offer more expensive name-brand drugs.

Some PBMs have created products that respond to the call for increased transparency, including identifying the amount retained by the PBM, identifying the rebates received, and eliminating non-rebate monies paid by pharmaceutical manufacturers. PBMs continue to be the most time-efficient and fully-integrated pharmacy benefit solution.

PBAs Not Without Flaws

PBAs, who used to solely manage public entities like state Medicaid programs, recently joined the private marketplace to compete with PBMs.

PBAs claim a greater level of transparency than PBMs because they pass through all drug manufacturers' rebates and charge only administration fees. Employers also have more control over what drugs are offered through a PBA.

But PBAs have a tendency to be inefficient, in that employers must directly determine many aspects
of how the PBA operates and then maintain these processes. PBAs function independent from pharmaceutical manufacturers, charging only a flat administrative fee. This, however, leaves little incentive for the PBA to find a way to lower drug costs.

Still Confused?

Employers are left at a crux between the PBMs and PBAs: Do you need to know all the costs associated with pharmacy benefit programs? Or is just knowing that you’re saving money with the program enough to quell any concern over how these savings are achieved? It has been proven that both PBMs and PBAs can save money – now it’s up to employers and their benefit administration professional to decide which option gives them the level of coverage they want for the price they can afford.