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PBM spread and rebate structures raise pharmacy costs for self-funded plans
Insurance Business reports that rising specialty drug prices, population health shifts, and PBM-employer misalignment are driving pharmacy cost growth faster than many employers budgeted.
Rising pharmacy costs are accelerating faster than medical spending, and self-funded employers are struggling to understand why, according to Insurance Business. The outlet says the issue is increasingly tied to both a heavy specialty drug pipeline and a growing gap between what pharmacy benefit managers, or PBMs, do and what plan sponsors assume they do.
Rick Kelly, National Pharmacy Lead and Senior Vice President for Employee Health and Benefits at Marsh McLennan Agency, described multiple forces pushing prices higher at once. He pointed to newer specialty-focused drugs that are very expensive, worsening population health, and higher cancer prevalence linked to longer life expectancy, while warning that none of the pressures are easing.
Kelly also argued that the financial mechanics of PBMs contribute to the cost problem. Insurance Business reports that major PBMs largely operate on a spread model, paying retail pharmacies one rate while charging the employer plan another, and that manufacturer rebates have been diluted through marketing fees, distribution fees, and other line items that make it harder for employers to see what they are truly receiving.
He further criticized broker and consultant arrangements, saying some broker communities work through coalitions or consortiums with PBMs that can resemble quasi-joint ventures. Insurance Business reports Kelly’s view is that this creates potential conflicts of interest that can increase employer expense at the plan level.