Introduction
Pharmaceutical manufacturers often face intense pressure from the “Big Three” Pharmacy Benefit Managers (PBMs). As PBMs consolidate power, they control which medications make it onto formularies, wielding significant clout in manufacturer negotiations. However, some manufacturers worry they may face retribution—like losing major coverage—if they pursue direct deals that bypass these intermediaries. This post explores how to overcome these “retribution” fears and create a safe harbor for more transparent partnerships.
The Fear Factor
Manufacturers that seek to engage employers or health plans directly run a real risk of missing out on massive PBM-controlled patient populations. In some cases, companies worry about being penalized through higher rebate demands or outright exclusion from formularies. These fears perpetuate an environment that favors existing PBM arrangements—even when more cost-effective, transparent options may be available.
Strategies to Reduce Risk
1. Coalition Building: By forming coalitions of like-minded employers, health plans, and other stakeholders, manufacturers can offset potential losses. When multiple organizations commit to a direct deal, the volume is compelling enough to mitigate the threat of PBM exclusion.
2. Volume Guarantees: Manufacturers can secure contracts stipulating minimum order volumes from multiple employers or healthcare systems. This assurance of demand can alleviate concerns about losing access through the PBM channel.
3. Multi-Manufacturer Alliances: Sometimes strength is found in numbers. Manufacturers can collaborate to negotiate better distribution options, share market insights, and amplify their collective voice, making PBM retaliation less likely due to broader market repercussions.
Case Study: Blue Shield of California’s Direct Biosimilar Deals
One illustrative example is Blue Shield of California’s decision to secure direct agreements for biosimilars in calendar 2024. The strategy focused on cutting out unnecessary mark-ups and ensuring more predictable pricing. By working closely with manufacturers, Blue Shield demonstrated that payers could achieve significant cost savings while preserving broad access for patients. This success story shows how a well-structured, pilot-style approach can pave the way for larger-scale adoption.
Implementation Tips
- Start Small: Initiate with limited drug categories or pilot programs. Gathering success metrics—like cost savings and patient outcomes—will bolster your case for broader rollouts.
- Establish Clear Parameters: Outline pricing, volume guarantees, and distribution logistics in detail to avert misunderstandings or future renegotiations.
- Focus on Transparency: The more open the negotiations and terms, the less credible any PBM threat appears. By openly sharing data on cost savings and clinical outcomes, manufacturers and payers can build trust with stakeholders and the public.
Conclusion
Creating a safe harbor for direct deals is achievable through coalition building, volume guarantees, and transparency. The experience of organizations like Blue Shield of California proves that direct biosimilar agreements can reduce costs and improve patient access. Ultimately, manufacturers and payers who pool resources, data, and strategies can overcome fears of PBM retribution. By demonstrating scale and promoting open dialogue, more manufacturers will feel confident embracing direct contracting for the benefit of patients and the healthcare system at large.
FAQ
1. What is a “safe harbor” for direct deals?
A “safe harbor” refers to a supportive environment where manufacturers can engage directly with payers or employers without fear of losing PBM-managed coverage.
2. Are direct deals only for large manufacturers or big payers?
No. Smaller manufacturers and smaller employer groups can form coalitions to negotiate collectively, ensuring they also benefit from shared volume.
3. How can payers and manufacturers handle potential PBM backlash?
By publicly sharing transparent pricing data and joining forces with multiple stakeholders, any backlash from a PBM would be less feasible. Strength in numbers helps mitigate risks.
4. What makes biosimilar deals a good starting point?
Biosimilars often have high cost-saving potential, making them a compelling first step. Demonstrating success with these products can encourage more direct arrangements.
