Stephanie, a self-employed Texan and a proud entrepreneur, stood confused at her local pharmacy counter. She just received a surprisingly high bill for a prescription she thought was covered under her individual health insurance. "How could this be? I thought I had good coverage," she wondered. This isn't just Stephanie's problem. Many Texans, like her, grapple with the complexities of prescription coverage on health insurance, often feeling lost and overwhelmed. Why does the prescription coverage on Texas health plans seem so confusing and nonsensical?
Pharmacy benefit managers, often referred to as PBMs, serve as intermediaries between health insurance companies and pharmacies. Historically, they were a part of health insurance companies but, over time, have emerged as standalone entities. Their primary goal? To manage prescription drug benefits on behalf of insurers. But who really owns these PBMs, and do they exclusively operate within health insurance plans?
Role of PBMs in the Health Insurance System
Pharmacy benefit managers play a pivotal role in the health insurance system. They oversee the prescription drug component, ensuring that health insurance companies offer medications at affordable rates to Texans. But how did they become so dominant? Initially, PBMs were departments within health insurers that worked to create value for the health insurance companies. However, as the complexities of prescription drugs grew, they became standalone entities. They now partner with health insurers and drug companies, with a goal of making the life of the insured better. Their collaboration with drug companies often revolves around drug formularies and drug rebates. Drug formularies are lists of drugs that are covered under a specific plan, often with tiers to determine drug pricing models for the insurance companies. Rebates are a form of price negotiation to make drugs more affordable for the insurance companies and, ideally, for consumers. The overall goal is supposed to be about controlling health care spending.
How Do PBMs Work
When Stephanie tries to get her prescriptions filled, it's the Pharmacy Benefit Managers working behind the scenes to streamline the administration of prescription drug coverage. They operate as a bridge between pharmacies, health insurance companies, and insured people like Stephanie. One of their many tasks is to handle pre-authorizations, ensuring that certain medications are appropriate for the patient before coverage is approved and delivered to the patient. But what all goes into this process?
Establishing Formularies and Designing Drug Plans
How do PBMs decide which medications are covered and which aren't? They establish drug formularies and design the management of drug plans. Deciding which drugs will be included in a health plan is a complex process that considers various factors, including patient access, cost, and utilization. For instance, they might implement strategies like prior authorization, where a medication needs approval before being dispensed, or step therapy, which requires patients to try less expensive alternatives first. Formulary drugs are typically approved and slotted into various tiers of copayments and coinsurance rates. This makes the step therapy easier to administer.
Negotiating Reimbursement Rates
Another significant function of PBMs is negotiating reimbursement rates for the health insurance plans. These managers act as negotiators between healthcare payers and pharmacies. By leveraging rebates from pharmaceutical manufacturers, they often negotiate rates lower than the medication's list price. In theory, this would lower the cost of the prescription being filled. However, this process isn't without its flaws. The lack of transparency can sometimes lead to higher out-of-pocket costs for patients, a problem Stephanie faced firsthand.
Creating Cost-Saving Strategies for Pharmaceuticals
PBMs aren't just about negotiations; they're also strategists. By negotiating rebates with drug manufacturers and securing discounts with pharmacies, they aim to lower prescription drug costs for both consumers and payers. This is also how they can create a profit for themselves in that some of those cost savings can actually go into their revenue.
Managing Patient Drug Profiles and Claims Processing
Behind every medication dispensed, there's a rigorous process of verifying and processing claims. PBMs play a role here, too. They manage patient drug profiles, assessing potential issues such as eligibility and previous prescription history top spot abuse of drugs. They can also help identify generic drugs to recommend when a more expensive drug might have been prescribed initially.
Maintaining Pharmacy Networks
PBMs maintain extensive pharmacy networks, contracting with various pharmacies under negotiated discounted fees. The goal of this network is to guarantee prescription access for insureds while also attempting to create better pricing models for the insurance companies that they are contracted with. This network comes with its challenges though, from legislative barriers to concerns raised by independent pharmacies about low reimbursement rates.
Pros/Cons of Using PBMs
Just as every coin has two sides, PBMs have both advantages and disadvantages. While many appreciate PBMs for streamlining processes, others criticize them for their opaque workings and perceived weird drug pricing. Since they are the ones blamed with denial of authorization for prescriptions or those weird pricing without much explanation, they are quickly blamed for potential problems that crop up for Texans being forced to use their services.
Potential Lower Prescription Drug Costs for Consumers & Insurers
PBMs can often bring down prescription drug costs for consumers and insurers, thanks to their negotiation skills and strategies. The pharmacy networks generated from their business model can also make sure that everyday Texans can have easier access to medications. But do these negotiations and networks always translate to benefits for the end consumer? The cost of prescription drugs sure doesn't make it feel like it!
Lack of Transparency for Drug Prices
One of the significant criticisms against PBMs is the lack of transparency in the pricing shown to insured Texans. They negotiate prices using various strategies, from volume purchase agreements to large rebate programs with pharmaceutical companies. When "negotiations" are opaque and the list prices associated with drug spending just keep climbing, it's hard to see how this is good for Texans. This intricate web of negotiations has often been blamed for the escalation in drug prices as a result.
Are Pharmacy Benefit Managers Good or Bad For Texans?
With both pros and cons, the debate remains: Are PBMs truly beneficial for Texans like Stephanie? Drug manufacturers may be rightly criticized for escalating prescription drug prices, but they are not in this alone. The retail pharmacies, health insurers, and PBMs all have their hand in the cookie jar. Which brings us back to the question of are they truly beneficial.
Do PBMs Actually Save Texans Money?
While PBMs are designed to save money by negotiating drug prices and securing discounts, the actual impact on an individual's wallet can vary. For some, like Stephanie, the benefits might not be directly visible. Especially when the health insurance company, the pharmacies, the physician system, and the PBM are all owned and controlled by the same parent corporation. Given what we are seeing in the drug spending in ACA Exchange Health Insurance Plans compared to cash paying options, it's very difficult to see the current system as a positive for Texas consumers.
What Are Alternatives To Saving On Prescriptions?
For Texans seeking alternatives to save on prescriptions, there are numerous strategies to consider. Many local, independent pharmacies now offer generic medications at very aggressive cash prices that may beat out what your network pharmacy can offer you. Mail-order pharmacies, both independent and network, can often save you money on 90 day supplies which is great for those with chronic conditions.
The two biggest alternatives for help on spending on prescription drugs is either of GoodRx or Cost Plus Drugs. Both of these companies operate similar to PBMs in that they are buying in bulk and negotiating prescription drug rebates for consumers. The difference is that they pass those savings directly to the consumer through transparent cash pricing models. GoodRX allows you to shop across the prescription drug market to compare prices, and Cost Plus is a mail order pharmacy that has very transparent pricing. Many Texans like Stephanie find substantial savings with these two companies.
We at Insurance For Texans understand these intricacies. As an independent health insurance agency, we explore various options to help our fellow Texans. And when beneficial, we offer suggestions to help with management of prescription drug costs. Even if it doesn't make us a profit.
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