As the healthcare industry continues to rapidly shift and evolve, so too does the pharmacy benefit manager (PBM) niche. There are a handful of key issues and trends that are fueling these changes — from pharma mega-mergers to value-based care efforts to demands for more transparency in the face of drug cost inflation.

How might they affect community pharmacy?

As a response to the new trajectory of the industry, big players in the space have already introduced delivery models that shake the traditional PBM model to its core. These can be seen with CVS and Express Scripts’ new models implemented after their recent mergers.

There’s no question that the PBM delivery model is moving away from the traditional rebate system or spread model. Let’s discuss a few of the driving forces for these changes and how they can affect community pharmacy and look at examples of new models we can expect to see more of.

Key Influences in the Delivery Model Shift

Before we examine some of the ways PBM delivery models are changing, let’s look at some of the key forces that are driving these changes.

Mega-mergers and vertical alignment:

Mergers like CVS-Aetna and Cigna-Express Scripts will give these corporations significant power in shaping the future of pharma — which is already in full force.
1. Shift to all things value-based: Healthcare models are moving away from fee-for-service in favor of value-based, which focuses more on improving the quality of care and patient well-being.
2. Increasing public and government scrutiny over drug cost inflation: The Trump Administration has promised lower drug costs for consumers, while specifically pointing a finger at the cloudy rebate systems among PBMs and insurers.

So, what immediate results can we observe? These mega-mergers are already leveraging their immense power with significant changes to their models.

How CVS and Express Scripts Are Paving the Way

Some of the most notable strides in PBM contracting can be seen from CVS and Express Scripts, who in 2018 introduced the beginning of what some may call “the next generation of PBM contracts.”

CVS’s Guaranteed Net Cost Model

CVS’s Guaranteed Net Cost is a pass-through model: the company will take 100 percent of rebates, discounts, and other fees covered by drug makers, and pass the savings along to health plan sponsors. In theory, this could be the removal of retroactive DIR fees. The model aims to provide greater simplicity, transparency, and predictability around drug costs, while taking more accountability for the impacts of inflation and drug mix shifts, like moving from brand names to generics.

CVS argues that current models don’t offer net cost predictability. To combat this, the new model guarantees the average spend per prescription for each client. It calculates expected rebate value and plan utilization, and applies projected inflation and expected shifts in the drug mix.

Express Scripts’ Pay-for-Performance Model

On January 1, 2019, Express Scripts introduced a pay-for-performance model aimed at addressing pharmacy performance in its Medicaid and commercial populations. Up to 35,000 national chain pharmacies, community pharmacies, and grocery store pharmacies are participating.

The program uses a web portal to help these pharmacies track their performance and identify gaps in care based on a few key metrics, which are similar to (but not identical) Medicare star ratings that focus on patient adherence. In this program, retailers perform against each other, so that they’re incentivized based on relative assessment as opposed to predefined benchmarks.

Other PBM pilot programs include metrics, beyond adherence, such as high-risk medication dispensing, generic dispensing, and comprehensive medication review rates.

Closing Thoughts

The healthcare industry — and top PBMs specifically — are experiencing external pressure and changing internal power structures that are allowing them to make huge strides in the way that pharmaceuticals are distributed.

For community pharmacies and patients, this could be good news. These changes could pose more standardization in pharmacy reporting metrics and the potential removal of retroactive DIR fees, which could make business and prescription revenue management more stable and predictable.

Pioneers like CVS and Express Scripts will likely have a significant impact on the future of the PBM model. Experts believe that the largest PBMs will continue to consolidate, while smaller PBMs will become more specialized.

As you continue to navigate this constantly-changing space, your community pharmacy can benefit from the expertise and security of networks like AlliantRx. We’re dedicated to helping pharmacies improve in all areas, from patient well-being to stakeholder satisfaction to your own bottom line, and we are dedicated to helping you stay on top of issues — like PBM evolution —as every change occurs.

Keep checking back for more PBM updates. And, if you’re not a member, join us today.