Introduction
Self-funded employers are uniquely positioned to rethink traditional pharmacy benefit models. With greater control over their plan designs, they can carve out pharmacy benefits to improve cost transparency, reduce risk, and innovate their approach. This article explores how employers can decouple risk-bearing from pharmacy benefit managers to optimize savings and member outcomes.
Traditional PBM vs. Decoupled Approach
Traditional PBM Model:
- Risk-sharing agreements often favor the PBM, with minimal transparency.
- Administrative fees and spread pricing inflate employer costs.
Decoupled Approach:
- Employers take control of cost structures, separating pharmacy benefits from traditional PBMs.
- Greater visibility into drug costs, rebates, and administrative expenses ensures accountability.
Building Blocks of a Decoupled Benefit Model
To successfully decouple pharmacy benefits, employers need to establish three key components:
- Claims Processing Outsourcing: Work with third-party administrators (TPAs) for efficient claims management.
- Independent Formulary Management: Utilize services from unbiased clinical advisors for formulary oversight.
- Direct Manufacturer Deals: Negotiate discounts directly with pharmaceutical manufacturers, bypassing intermediaries. Coalitions are going to help facilitate this in the future, with like-minded leaders pooling their purchasing power
Implementation Roadmap
- Start with a Pilot Program:
Focus on a single drug class, such as specialty medications, to test the decoupled model. Blue Shield of California is doing this now, but I believe there’s more to be done. - Renegotiate Contracts:
Transition existing agreements with TPAs, PBMs, and manufacturers to reflect the new model. - Leverage Analytics:
Use data-driven insights to monitor utilization, pricing trends, and member satisfaction during the pilot, with open lines for re-negotiation
Success Metrics
Employers can measure the success of a decoupled model using:
- Lower Trend Rates: Reduced year-over-year increases in pharmacy spend.
- Member Satisfaction: Improved perception of plan benefits and accessibility.
- Pass-Through Savings: Transparent rebate structures directly benefiting the employers. Even better would be no rebates at all. The final cost would be the true cost.
Conclusion
Decoupling risk-bearing from pharmacy benefits allows self-funded employers to take ownership of their pharmacy spend. By prioritizing cost transparency, direct manufacturer relationships, and independent oversight, this innovative approach empowers employers to deliver value-driven healthcare solutions. The future of self-insured plan innovation lies in taking bold steps to separate pharmacy benefits from outdated, opaque models.
