Timothy Mizak and Nicole Bulochnik of Abarca talked about how can PBMs help payers manage costs through a hybrid network model that leverages value-based and other innovative drug contracts at the Pharmacy Benefit Management Institute (PBMI) annual meeting in Orlando.
Both traditional approaches and alternative or transparent models of pharmacy benefit networks have disadvantages and trade-offs. Although there has been a big market shift toward transparent PBM pricing models, traditional models may be more beneficial for plans looking for a more aggressive approach on pricing, drug tiering, and utilization management.
The trade-off, however, is that they may be inflexible with limited transparency and the PBM “spread” creates controversy, Nicole Bulochnik, vice president of drug pricing and network strategy at Abarca Health, said Tuesday at the 2022 Pharmacy Benefit Management Institute (PBMI) Annual National Conference in Orlando, Florida.
Spread pricing is where PBMs charge health plans and payers more for a prescription drug than what they reimburse to the pharmacy and then keep the difference. The concern about spread pricing is that it incentivizes pharmaceutical manufacturers to raise prices overall and then offer discounted rates and rebates that increase PBM profits.
This has led to the push for transparent, pass-through drug pricing where the PBM passes only the cost that they pay for prescription plus an administration fee. “The trade off, however, is that rates aren’t going to be as aggressive as in the traditional network and there can be higher administration fees,” Bulochnik said. She said payers in the traditional plans don’t see the administration fees because they are integrated into the pricing.”
She said the pass-through plans are likely to focus on the use of generic drugs. “We validated this. We found is that most generics are going to be less than $10 per prescription. If the dispensing fees are greater than $10, then a lot of the savings that that you would have initially gained from those acquisition cost plus models might be eroded by the fact that most of the drugs are generic,” she said.
Abarca’s approach, she said, is a hybrid of the two networks. The PBM includes a more aggressive pricing with visibility and sharing of any overperformance. Bulochnik said this approach eliminates spread pricing and, instead of a vendor relationship, creates a partnership between the plan and the PBM.
This hybrid approach provides more opportunity to leverage value-based contracts with pharmaceutical manufacturers, Timothy Mizak, Pharm.D., MBA, director, formulary management Abarca, said in the same session at PBMI. “These innovative contracts, including value-based agreements or outcomes-based contracts go beyond access. They look toward specific outcomes, such as prevention of disease, meeting adherence, metrics, persistence, reducing hospitalizations,” he said.
Value-based contracts determine payment based on patient, clinical, cost or other outcomes. Alternative financing arrangements allow for a more flexible approach to payment, including pay-over-time or subscription models.
There were almost 100 contracts with these novel agreements in 2021, according to the drug manufacturer lobby group Pharmaceutical Research and Manufacturers of America (PhRMA). These contracts cover 19 therapeutic areas (including neurology, cardiology, endocrinology, and oncology), 67 branded medications, and 39 manufacturers.
Mizak expects these types of programs will increase in the future. Although these contracts may be difficult to negotiate and the clinical data may be complex, they can provide value. “We'll continue to see more seamless data integration, data analytics, that will help these types of agreements to grow and become a little bit more feasible for kind of all payers across the spectrum. And hopefully, that will become more of a standard.