The Role of Specialty Benefit Managers in #PhysicalTherapy: Echoes from PBMs in the Pharmaceutical Industry Part I
Pharmacy Benefit Managers (PBMs) deservedly are under scrutiny that would rival a political vetting. These middlemen purport to try and save employers and thus their employees (patients) money. As it turns out, their consolidation necessitated them to drive profits and growth in such a way that they invented a ton of tactics that in aggregate add cost, create confusion, stir up a mess. Here are some recent articles that highlight this as well as legislative effort that many states have enacted to counteract their methods.
And
In physical therapy, we have been dealing with these middlemen for years and I have written extensively about their shenanigans and how they take from providers and direct patients to providers where they have negotiated the lowest rate so they can gain greater share as they tend to get paid by what they save. Here is a partial list of these who tend to specialize in group health or worker’s comp (and they all bring about disdain and shouts of disgust from the #physicaltherapy providers):
Evicore
MedRisk
OrthoNet
Align Networks
OneCall Care Management
OptumHealth
Palladian Health
NIA Magellan
American Specialty Health (ASH)
HealthSmart
The overwhelming scrutiny of PBM’s in pharmacy is something we have to watch and learn. In Part I, to level set, will provide a summary of Pharmacy PBMs so that we can fundamentally understand how they work and you will be reminded of the similar techniques they use in physical therapy. The hope is that we can use similar tactics to reform, eliminate, or diminish their current impact by both pressure and governmental intervention.
Summary of Pharmacy PBMs and Current Scrutiny by Governmental Regulators and Employers
Pharmacy Benefit Managers (PBMs) are intermediaries that negotiate drug prices between insurers, pharmacies, and drug manufacturers. They are intended to manage prescription drug benefits on behalf of health plans, aiming to control costs and ensure appropriate medication use. However, their practices have come under increasing scrutiny due to several key concerns:
- **Price Transparency**: PBMs are often criticized for the lack of transparency in their pricing mechanisms. The rebates and discounts they negotiate with drug manufacturers are not always passed on to consumers, leading to higher out-of-pocket costs.
2. **Rebate Practices**: PBMs receive significant rebates from drug manufacturers in exchange for favorable placement on formularies. These rebates can incentivize the promotion of higher-cost drugs over more affordable options.
3. **Spread Pricing**: This practice involves PBMs charging health plans more for a drug than what they reimburse to the pharmacy, keeping the difference (the “spread”) as profit. This practice has been criticized for contributing to inflated drug prices.
4. **Limited Competition**: The PBM market is dominated by a few large players (e.g., Express Scripts, CVS Caremark, OptumRx), reducing competition and increasing their market power.
Governmental Scrutiny
Governmental regulators at both the federal and state levels have taken steps to address these issues:
• Investigations and Legislation: Various investigations and legislative proposals aim to increase transparency, regulate rebate practices, and prevent spread pricing. For instance, the Federal Trade Commission (FTC) has initiated investigations into PBM practices, and several states have passed laws requiring greater transparency and regulation of PBM activities.
• Rebate Rule: The Trump administration introduced the Rebate Rule, which aimed to eliminate rebate practices that contribute to high drug prices, though its implementation has faced delays and opposition.
• Medicaid and Medicare Regulations: The Centers for Medicare & Medicaid Services (CMS) have implemented rules to increase PBM transparency and accountability, particularly concerning how PBMs report and use rebates.
Employer Actions
Employers, particularly large self-insured employers, are also pushing back against PBM practices:
• Direct Contracting: Some employers are bypassing PBMs by directly contracting with pharmacies and drug manufacturers to secure better pricing and transparency.
• Coalitions and Advocacy: Employer coalitions, such as the Purchaser Business Group on Health (PBGH), advocate for reforms in PBM practices and push for greater transparency and fair pricing.
• Alternative Models: Employers are exploring alternative models such as transparent PBMs, which operate on a fee-based structure rather than relying on rebates and spread pricing, to ensure that savings are passed directly to the consumers.
The current scrutiny of PBMs reflects growing concerns over their impact on drug prices and healthcare costs. Governmental regulators and employers are actively seeking ways to reform PBM practices to ensure greater transparency, fairness, and affordability in the pharmaceutical market. These efforts are crucial in addressing the high cost of prescription drugs and improving the overall efficiency of the healthcare system.
The influence and operations of physical therapy Specialty Benefit Mangers (SBMs) often mirror those of traditional PBMs in the pharmaceutical industry, impacting the cost, access, and quality of care in physical therapy. Understanding these mechanisms can help providers and patients navigate the complexities introduced by SBMs and advocate for a more balanced approach to care management.
Providers and patients generally are becoming more familiar with Pharmacy Benefit Managers (PBMs), and our minds typically drift toward the pharmaceutical industry and the complex web they weave around drug pricing. However, the reach of PBMs extends far beyond pharmaceuticals, touching physical therapy, chiropractic care, durable medical equipment (DME), and more. The scrutiny PBMs face in the pharmaceutical sector is not an isolated incident; it mirrors their practices in our own realm of physical therapy.
And this we will explore in Part II.
Thoughts?
@physicaltherapy
