How Transparent Is PBM Pass Through Pricing?
When evaluating a Pharmacy Benefit Manager (PBM), self-funded insurance plans need to be aware of the hidden complexities behind prescription drug savings. Unlike other sectors, PBMs are largely unregulated, meaning they are not required to disclose certain deals that often take a cut from potential Rx savings.
With rising drug costs drawing attention, many organizations are attracted to the "pass-through" PBM model. In this setup, the PBM promises to transfer network discounts, rebates, and general PBM services for a simple administrative fee, often calculated as Per Member Per Month (PMPM). While this may sound transparent and straightforward, the reality is more complex.
As contracts pass through multiple PBMs or pharmacy benefit resellers, additional revenue streams are created—often hidden from the plan sponsor. These streams typically involve spreads on network claims, a percentage taken from rebates, or fees for formulary management. As a result, potential savings for the plan sponsor diminish as these intermediaries take their share.
Additionally, retail pharmacy networks are often pre-negotiated, which can result in variable and less aggressive discounts at smaller or poorly negotiated pharmacies. When discounts are simply "passed through" without adjustments, your PBM may not deliver on the savings it promises, leaving plans with higher-than-expected costs.
When self-funded plans negotiate guaranteed Average Wholesale Price (AWP) discounts across the entire pharmacy network PBMs are compelled to assume more risk and actively renegotiate low-performing network contracts, ensuring better long-term savings.
Take control of your pharmacy benefits with proactive strategies that align with your health plan's financial goals. Contact APC today to learn how we can help navigate the complexities of drug pricing, optimize PBM selection, and protect your health plan's bottom line.