Efforts to reform the PBM industry in 2022 from outside and within
Federal and state legislators have attempted to drive reform several times over the years, with state legislators having greater success in recent times. Within the PBM industry, while the three largest PBMs handle the vast majority of scripts, many smaller companies have attempted to create alternative disruptive approaches.
The Traditional PBM Model Has Become a Popular Target for Legislators and Entrepreneurs
Pharmacy Benefit Managers (PBMs) have been a major target of criticism in the debate around pharmaceutical costs, while pharmaceutical companies themselves have gotten a reprieve following the development of vaccines and other COVID-related products, with 60% positive public perception recently vs. 26% positive in 2008, according to data from The Harris Poll. While there isn’t comparable data from that source on the PBM industry, given proposed political actions and continued critical comments from many directions, it is safe to say the PBM industry has not followed the same trend.
Federal and state legislators have attempted to drive reform several times over the years, with state legislators having greater success in recent times. Within the PBM industry, while the three largest PBMs handle the vast majority of scripts, many smaller companies have attempted to create alternative disruptive approaches. Even Mark Cuban, the Dallas Mavericks owner, entrepreneur, and TV personality, is launching a new PBM called Mark Cuban CostPlus PBM with the description, “We hate PBMs. So we made a better one.”
Some Reforms Stall Under the Biden Administration
At the federal level, the Biden administration froze much of the activity proposed by the Trump administration around PBM reform after taking office, including the treatment of pharmaceutical rebates. The proposed Build Back Better Act in 2021 had provisions attempting to address drug pricing but was not focused on trying to alter the PBM industry as directly as the prior Trump administration executive order had attempted.
State Legislation on PBM Reform Outpacing Federal Activity
Many states have been in front of the federal government in their efforts to reform the PBM industry, with a notable recent example being the Governor of New York announcing the signing of significant legislation at the start of this year. This legislation requires PBMs to register and be licensed and sets forth duties and obligations (including around much greater transparency) that PBMs must follow when performing services. Further, it also provides for the New York Department of Financial Services to enforce the law and receive complaints from constituents.
Emerging PBMs Looking to Disrupt the Status Quo
Given the market position of the largest PBMs, many of the smaller participants have tried to differentiate themselves, some with great success over the years, while others have stagnated. One area of focus has been around technology, since many of the traditional PBM technology platforms are antiquated. By using technology tools, some companies have offered modularity, allowing their clients to pick and choose only the components they want. Others have focused on taking financial risk around drug trend. Most of these companies also tout a greater level of transparency, including Mark Cuban’s cost-plus model. However, the greatest benefit could be by directing efforts at better managing the patient through medication management and other tools that could impact not only pharmacy costs, but other medical costs as well. The companies who can achieve this would stand a greater chance of thriving in whatever shape PBM reform ends up taking.