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Are Pharmacy Benefits Managers Worth It? How Partnering with One Improves Patient Outcomes and Reduces Costs for Payers

September 27, 2023 · Optum Workers' Comp and Auto No-Fault

As the media focuses on PBM pricing transparency, it’s important to consider all the benefits PBMs bring to the table.

Over the past few years, pricing transparency has become a major topic of interest for workers’ compensation and group health payers who use pharmacy benefit managers (PBMs).

Some payers are concerned that PBMs are contributing to high drug prices, and that they may be overcompensated for their services. Questions about pricing transparency began on the group health side, but, as they often do, the conversation has widened to include workers’ compensation. Many payers struggle to explain what they mean when they talk with their PBM about transparent pricing, and few understand the full extent of the programs and services their PBM offers to make the delivery of pharmaceutical care streamlined and efficient.

“Price transparency means something completely different from PBM to PBM, from payer to payer. It’s really a buzzword,” said Michelle Nack, senior vice president of strategy and commercial finance for Optum Workers’ Comp and Auto No-Fault.

“I always say to our clients, ‘What are you trying to understand when you ask about pricing transparency? Are you thinking you’re not getting enough savings from your overall program? Are you wondering if your price per medication is too high? What are you trying to achieve?’ ”

When payers ask about pricing, their concerns boil down to one central question: Am I getting good value from my PBM? In order to evaluate that, payers need to understand what services they’re receiving and the value these services bring to their overall pharmacy program.

PBMs can help cut pharmaceutical costs while offering critical claims management programs and support, improve therapeutic outcomes and — in the case of workers’ comp — reduce the amount of time it takes an injured worker to return to work, cutting costs over the long term.

Reduce the Financial Burden and Improve Pharmaceutical Management

When payers think of the benefits of PBMs, it’s important for them to ask themselves what they’re looking to get out of the partnership: “Why are you choosing to use a PBM to help manage your program?” said Tron Emptage, chief clinical officer with Optum.

“Are you wanting to make yourself more efficient as a payer? To make sure you’re doing the best to follow all the workers’ compensation rules and regulations in all the states that you do business? To help with the clinical management of the claims and injured workers you serve via your policyholders?”

While there are a number of benefits to working with a PBM, most payers use them to help manage prescription drug costs. They also employ them to ensure patients are using medications safely, to reduce the use of medications that may not be related to the claim, and to help manage the use of medications like opioids that have potentially dangerous side effects and can be misused.

On the cost control end, PBMs are able to pass savings on to their clients by negotiating prices with pharmacy networks, managing claimant utilization, recommending medications with lower costs of treatment or rebates where applicable, and facilitating the substitution of generic medications for higher-priced brand-name ones.

Utilization management programs are of primary importance in controlling costs for both individual claims and populations of claimants. To assist with the processing of rebates to help lower prescription costs, many workers’ compensation PBMs use rebate aggregators.

Aggregators combine transactional data from several different sources, thereby streamlining the collection processes from manufacturers. Rebate processes take time to complete through systems to validate the dispensing of medications, and because of this, some PBMs may factor in an anticipated rebate and offer clients a discount up front.

Both rebate strategies are used in the industry, but in the latter, the payer may experience an upfront price reduction, rather than having to wait several months for the rebate to be processed by the manufacturer. In this model, the PBM assumes the risk for collecting the rebate.

As stated above, however, the cost savings PBMs offer go beyond their ability to collect rebates and negotiate drug prices. Workers’ comp PBMs often offer their clients pharmaceutical management services, evaluating prescriptions to ensure they’re clinically appropriate for a particular injury. With a PBM partnership, payers can feel assured that injured workers are getting safe, effective treatments. This additional layer of oversight can improve claims outcomes and help injured workers return to work more quickly.

“We want to take care of things clinically to the best of our ability. That means making sure that injured persons are getting safe, efficacious treatment that is evidence-medicine-based and that follows the state-based rules of their claim’s jurisdiction,” Emptage said.

Some payers focus more on the costs of individual prescriptions when talking with their PBM about pricing, but Nack says that view is shortsighted. The total cost of program relies on more than just the pricing on an individual drug; by monitoring which prescriptions an injured worker receives and evaluating whether they’re appropriate for a particular injury or condition, payers can ensure they’re not financially responsible for drugs that aren’t related to the treatment of the covered injury or illness.

“If you’re paying for 20% of scripts that you shouldn’t even be paying for in the first place, those line items become just one component of the program cost,” Nack said.

Scrutiny of State Regulations

In addition to negotiating lower drug prices and offering pharmaceutical management services, PBMs take on administrative duties for their clients, including claims processing, rebate reimbursement and regulatory monitoring. Without a trusted partner, these tasks can pile up and become difficult for payers to manage on their own at a claim level.

“There are many clinical and processing tasks that can easily accumulate on claims,” Emptage said.

“Then challenges with timely reimbursements and state filings and reporting come into the picture. Determining who’s going to manage all these tasks is important. Are you going to want to pay all these other entities to execute on them? In addition, the appropriateness of pharmaceutical treatments has to be addressed, whether for the injury or as outlined by a state’s rule or formulary,” Emptage said.

Regulatory services in particular are a major benefit for workers’ comp payers that choose to partner with a PBM. Different states have different drug formularies and pharmacy regulations that can be difficult to manage, especially for employers operating in multiple states. These regulations are also shifting constantly, making it a challenge for payers to stay up to date on the rules.

“It’s like the Wild West when it comes to rules in workers’ comp. Each state can do whatever it wants, which makes it a challenge for all of us,” Nack said.

PBMs are experts in this space and can take on some of the regulatory burden for their clients by helping to implement processes that address the regulations and medication coverage requirements.

Why Companies of Any Size Can Benefit From Partnering with a PBM

Beyond cost, pharmaceutical and administrative management, PBMs also offer flexible solutions for both large and small companies.

“We have — and have for a long time — built our programs around flexibility,” Emptage said.

“If someone is focused on return-to-work or medication safety or data, we have to be able to address all of those for each client, depending on what’s most important to them,” Nack added.

Payers want to look for a larger, more experienced PBM that offers a variety of services. That way, they know the program can be tailored toward their individual needs and interests. Larger PBMs are also more likely to have their own pharmacy networks, giving them more power when it comes to offering the most competitive prices for the medications utilized in workers’ compensation.

“You’ve got to be flexible to make the changes required by states and requested by clients,” Emptage said.

“Whether it be a fee schedule change, a pricing change or the emergence of a new drug, you need a PBM that has the ability to manage that based on their system capabilities. This comes from having the breadth and depth of a major PBM with the resources to help manage those factors for the benefit of the client.”


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Michelle Nack,
Senior Vice President of Strategy and Commercial Finance

Tron Emptage,  MA, RPh
Chief Clinical Officer 

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