The Shifting PBM Landscape

As we approach January 1st, many employers are yet again seeing increases to the cost of their health plan – an all too familiar product of a health insurance model that isn’t working for consumers. Time and again, we’ve seen costs rise for plan participants without any changes to their treatment or prescription drugs. But there’s hope. Recently, some plan providers are starting to listen to consumers and pivot away from some of the traditional models that have historically driven up the cost of prescription drugs.

A New Health Insurance Model

On Thursday, August 17, 2023, CVS Health saw a significant drop in the price of their stock – 8% in a single day. The cause? An announcement made by Blue Cross Blue Shield (BCBS) of California earlier that day. The company stated that they would be dropping CVS Health’s pharmacy benefit management (PBM) services in an attempt to reduce the cost of prescription drugs for their plan members. 

You may recall a previous video where we walked through the history of pharmacy benefit managers, and discussed how PBMs currently act as the middleman between a health plan and pharmaceutical manufacturers, supposedly negotiating the best prices for plans and plan participants. However, the majority of PBM services are provided by large pharmaceutical companies that actually drive up the cost of prescription drugs to increase their revenue. This has been standard practice in the health insurance industry for decades, until now.

While it’s not uncommon for health insurance companies to change PBMs frequently, the shift away from using traditional PBMs altogether is unprecedented, which led to the drop in CVS’ stock prices. With this move of nearly 5 million members away from CVS Health’s PBM services, BCBS of California is implementing a new model that seeks to deliver transparent, sustainably affordable prices for health plan members.

BCBS of California’s announcement stated that, “In today’s current pharmacy supply chain, there can be up to a dozen companies involved in the process from when a drug is made to when a member receives it. Some can add complexity and cost without adding value or providing transparency into the rationale for their pricing.” This new model includes partnerships with organizations like Amazon Pharmacy and Mark Cuban’s Cost Plus Drugs, which BCBS says will help them “offer an integrated, coordinated, and holistic pharmacy experience to its members.”

What does this mean?

We believe we’re at the beginning of a massive shift in the pharmacy and pharmacy benefit manager industry as a result of this announcement. Larger health insurance providers who own their own pharmacy benefit managers make money on both sides of the dollar, and because of this, organizations who rely on those traditional health insurers will be unable to move away from the more expensive model. However, self-funded employers are not bound to this model, and they have the freedom to break away from the current system and see reduced costs for their health plans and participants.

Want to learn more about how your company can save amidst the current health insurance landscape? We’d love to chat with you! Contact the Total Control Health Plans team today.

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