I’ve come across a very informative article written by William McConnell, “Behind the War Between HealthPlans and PBMs” that I want to share with you today. Click here to access the article.

Interestingly, the author predicts that despite the new administration’s pledge to reduce drug cost and spending, it’s unrealistic to expect that anything will change. The only real change might be coming from  the new head of the FDA, Scott Gottlieb, who has called for “replacing the current PBM model, in which drug manufacturers compete to be included on insurance company approved lists—dubbed formularies—by offering rebates to the PBMs based on the volume of a drug’s sales.” The current system encourages drugmakers to push the initial sale price as high as possible. Gottlieb has called for negotiation of upfront drug discounts instead and the elimination of the rebate system. This change will really benefit healthplans and may prevent unnecessary litigation that we’ve recently seen between the major healthplans and PBMs, such as Anthem v. Express Scripts. If Gottlieb’s suggestion is implemented, the author argues that the role and influence of PBMs in formulary selection would vanish. Several insurers are already experimenting with value-based pricing that pays drugmakers more when their drugs prove effective at lowering costs of treating patient populations, particularly those with chronic conditions like diabetes, multiple sclerosis, hepatitis C and high cholesterol, which account for a huge percentage of health care costs. Some healthplans had been successfully operating their own PBMs (the article talks about such models and why they’ve been successful), and it is likely that we will see more healthplans opening their own PBMs or merging with existing ones. This can potentially dilute the PBM market and increase competition causing a drug price reduction. Stay tuned…