There are two business practices of traditional PBMs that we find particularly problematic.
The first is spread pricing. In effect, this makes the PBM a middleman who takes a slice of the business - but doesn’t tell you how much. Middlemen are a part of many everyday transactions. But normally, they don’t have a huge amount of control over your volume. A grocery store doesn’t tell you how many dollars worth of groceries you have to buy. A rug salesman may try to talk you into buying more rugs - but you get to decide how many you want. But besides being a middleman, a PBM’s other job is influencing volume through pharmacy management. And herein lies the problem: a spread PBM is profiting in undisclosed ways from the medication volume over which it has significant control. A conflict of interest if ever there was one.
The second practice is nickel-and-diming. This is when the price you expect to pay a PBM turns out to be a starting price that excludes many services you want or may even need.
Consider the experience of working with big PBMs like that of buying a car. The list price may be appealing. But the list price is very rarely the “out the door” price. There are plenty of buy-ups between the first number and what you’ll pay to get what you actually want.
This nickel-and-diming ends up being bad not only for the plan member but also for the PBM’s own client, the plan sponsor. Because often one of the “upgrades” a plan sponsor must pay more for is utilization management. This means that you can pay the base price for a PBM and find that the PBM isn’t going to actively manage the use of medications by your members. And how medications are used (how much, what kind, for how long) is a major driver of cost.
When plan sponsors don’t pay to manage this utilization, this is ok for the PBM. Many PBMs are incentivized to increase utilization as they profit from drug volume, rebates, and various fees.
But anyone who has ever bought a car would agree: wouldn’t it be magic if the price on the car’s windshield sticker was the price you actually paid to get all the things you need and want? In other words, what if what you saw was what you got?
That’s how we do business. It’s different; we think it’s better.
It’s easier to convince people to pay less now than to pay more now, even if paying less now means they pay more later. That’s the challenge with being transparent.
We’re like the contractor or plumber who comes in and gives you an accurate quote. It may not be the lowest. It may not be the best way to gain your business this time. But it’s the best way to gain your business next time and every time after that. Because you can trust us. We do what we say we’ll do. No hidden costs. No bad surprises. A single admin fee includes all our services. And since we don’t profit from volume, our interests lie in managing your members’ use and experience so well you want to keep working with us.
“We want the patient to be on the best drug for the patient, not the best drug for the PBM.”
– WithMe Health Clinical Team
We’ve found that some people aren’t ready for the way we operate, but also that some are. Maybe they’ve been burned in the past by the lowest bidder. Maybe they hired a contractor whose project lasted longer and grew more expensive as it went.
WithMe’s CEO Joe Murad used one word to describe why it’s hard to change practices in the PBM industry: inertia. Even when an employer is unhappy with their PBM’s management of their pharmacy spend and experience, it can be a difficult task to get in gear to make a change.
But the world is moving in our direction. Legislation is requiring greater transparency and accountability from PBMs. The FTC probe is asking of PBMs: are they overcharging clients? Is this hurting members? What is the impact of the lack of transparency? Of the conflicts of interest?
And demand from clients for greater transparency is increasing. We know this from our own experience doing business. But we also see it in business decisions being made by the most immovable players in the space, the Big 3 PBMs. One example: ExpressScripts recently introduced a new business model, ClearCareRx, which they maintain will offer this to clients.
These are still early days - but we’re excited. Because when the world starts moving in a good direction, we want to be at the head of the crowd, in the sunshine, part of the pack that is well out of the shadows.
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