Don’t Let Hidden Revenue Drive Your Prescription Drug Spending
JUNE 7, 2022
Pharmacy expense is the fastest growing line item for most employer health plans. Pharmacy costs are also unique in that the insurance company and/or pharmacy benefits manager (PBM) typically earns a profit from prescription drug claims costs, in addition to premium or administration fees.
As revenue flows from prescription drug usage, PBMs remain incentivized to keep costs high. In many cases, employers are not even aware of the insurer or PBM profit sources embedded within their plans:
- Rebates — Paid to the PBM from the drug manufacturer, rebates account for roughly 33% of total pharmacy costs for employers. Manufacturer rebates also often incentivize PBMs to include higher-cost drugs in their formularies (the lists of covered medications the PBMs set and maintain), even when less expensive options may be as effective.
- Spread pricing — The insurer or PBM charges the employer more than the pharmacy is reimbursed, and profits on the difference. While this accounts for 3% of the total cost of healthcare for employers, PBM profits can add up quick.
- Broker coalitions — Under these arrangements, smaller employers can leverage the buying power of a much larger organization. However, there is typically little transparency into the contract between the broker and the PBM, and additional sources of revenue are often not disclosed to participating employers.
To learn more about this and other solutions designed to lower the cost of your health plan benefits and improve health outcomes for your plan members, contact your local USI benefits consultant or email email@example.com.