The hidden truth about medication pricing

Pharmacy Benefit Managers (PBMs) play a crucial role in managing prescription drug benefits for companies and insurance plans. However, the lack of transparency and complex contracts within the PBM industry has raised concerns about excessive costs and potential conflicts of interest.

In this article, we delve into the hidden costs associated with PBMs, exploring the intricate web of contracts, pricing arrangements, and ownership structures that can significantly impact the prices paid by employers and patients.

By shedding light on these practices, we aim to empower readers with a deeper understanding of the PBM landscape and present alternative solutions that prioritize transparency and cost-effectiveness.


Hidden Costs and Issues in Pharmacy Benefit Managers (PBMs)

Your PBM, which you hired to negotiate the lowest possible cost for you, may not be transparent about their contracts with pharmacies. They could have backdoor contracts that pay them more than what you are aware of.

For example, while your company pays AWP-18%, the PBM may have a contract with the pharmacy paying AWP-20%. This price difference between contracts allows the PBM to profit.


Complex Pharmacy Contracts and Lack of Transparency

PBMs use confusing language and terms in pharmacy contracts, often including “lesser of” clauses regarding price. This complexity makes it difficult for most people to understand the contracts fully.

These contracts may also include Max Allowable Cost (MAC), which pharmacies rarely receive a list of to help lower their acquisition costs. Furthermore, pharmacies are charged transaction fees per claim.


Inflated Prices and Ownership of Specialty Pharmacies

Pharmacy contracts can result in inflated prices, as illustrated by a case where a patient paid a $45 copay, but the company was billed $930 for a drug that cost $29.11.

PBMs, many of which own pharmacies, control the Prior Authorization process and have ownership stakes in over 90% of Specialty Pharmacies. These specialty pharmacies may have different names but are owned by the PBM, creating potential conflicts of interest.


Introducing a Solution: Direct Rx and Intercept Rx

Direct Rx offers an alternative approach. Instead of using the Average Wholesale Price (AWP) to contract, they utilize a patented acquisition index that pays the pharmacy their actual cost for the drug plus a dispensing fee.

Unlike many PBMs, Direct Rx does not own a pharmacy. They support small businesses and work with independent pharmacies to provide mail order services and specialty pharmacy support. They have an independent company managing Prior Authorizations, ensuring adherence to clinical guidelines and eliminating backdoor profits.

Intercept Rx is a program developed by Direct Rx to address the issues associated with egregious contracts. It employs proprietary software to identify overcharges in self-funded plans. Direct contracts are then leveraged to provide the same drugs at significantly reduced costs for companies and their employees.

The goal is to bring innovation and lasting change to the industry, fostering long-term partnerships.