Happy 2017 to all of you working with PBMs! You made it through a tough 2016. By that I mean:

  • Increased PBM transparency

  • Constant pressure on lowering cost

  • Shorter-term contracts

  • Change in specialty drugs delivery and reimbursement models

  • Lower pharmacy reimbursements

In 2016, prescription drug prices rose an average of 7% (the largest increase in 24 years). Government projections foresee the country’s drug expenditures increasing by 6.7% annually through 2025. So lowering drug prices is No. 1 priority for the plans and PBMs. Some attempts to lower drug prices were taken to court. For example, Anthem has sued Express Scripts for unfair dealings (charging “above competitive pricing levels”).  Government investigations of PBMs are increasing as well. One example is: Department of Justice and U.S. attorneys for the Southern District of New York and Massachusetts are investigating the industry’s pricing structures, client payment plans, and patient assistance programs.

No wonder PBMs are flexing their muscles to negotiate deeper discounts (as we’ve seen with hepatitis C drugs). With the cost of new specialty drugs expected to match the amount spent on all other prescription drugs combined by 2018, specialty drugs delivery and reimbursement is getting more and more creative. For example, Caremark announced that it stops reimbursing physicians under Part D for specialty drugs dispensing in 2017. But Express Scripts is getting the award for being the most creative by launching a program called “specialty benefit services” that manages the distribution of biologics under both pharmacy and medical benefits. Officials at Express Scripts say they’re bringing together the three functions needed to manage specialty benefits: pharmacy benefit management, specialty pharmacy and distribution, and medical benefit management. They also offer buy-and-bill to physicians through access to wholesale drug prices and expedited reimbursement processes.

Drug manufacturers are joining the race by more aggressive push of direct-to-consumer coupons. Historically, PBMs have structured their business model by controlling formularies. Offering coupons disrupts that model. The model is also disrupted by the increased pressure from the plans to shorten PBM contracts. Usually, PBMs offer three-year agreements, with some for five or even seven years. These often come with early-termination penalties. Longer contracts help PBMs recover the expense of loading plan member eligibility onto PBM software, system changes, and staffing costs.

We’ve also seen lots of tension between independent pharmacies and PBMs based on inadequate reimbursement in 2016, majority resulting from the DIR fees. Several law suits were filed by pharmacies and some hearings were heard in legislature. Thus, Arkansas Act 900 and Florida 2016 legislation were enacted to require PBMs to reimburse at above acquisition rate.

As I said, tough year for all: healthplans, PBMs, and especially independent pharmacies. In 2017 we will likely to see even more changes in how PBMs operate and more vigorous state control over PBM operations (registration, audits, etc.). But the biggest trend is more control in the hands of the plans and less potential for PBM abuse to contain ever-rising drug cost. Happy 2017…?