5 Key Takeaways on the Future of PBMs from Our BAM Summit

At SmithRx, we’re proud to be at the forefront of pharmacy benefit manager (PBM) transformation. We also recognize that widespread progress and adoption of modern PBMs requires education, buy-in, and enablement across the benefits industry. In the spirit of moving the needle, we brought together leaders in the insurance and benefits space for our Broker Account Manager (BAM) Summit to discuss trends brokers and employers are facing today—and how we can work together to affect positive change for pharmacy benefits.

We welcomed industry movers and shakers to the BAM Summit stage to share their insights into what a better, brighter future could look like for pharmacy—and what obstacles are standing in the way today. The consensus was clear: we can’t continue as we have been, legacy players are continuing to dominate based on the opaque system they designed, and meaningful progress will depend on transparency across the industry.

That’s not to say that everything about the pharmacy benefits space needs to be thrown out to build a better future. In fact, there are ‘hidden gems’ within the industry that can provide a way forward. Though PBMs are largely equated with the bad actions of legacy PBM players, there are modern, people-first PBMs that are redefining what it means to be a pharmacy benefit manager for good, thus sparking real change.

Every leader agreed: the pharmacy benefits market is non-functional in its current state. It harms employers, members, and medical professionals like pharmacists deeply. To move forward, there needs to be a focus on radical transparency, execution, and the member experience. 

Explore our key takeaways from the Summit below and catch highlights from the event here.

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Takeaway 1: The PBM Market is Fundamentally Broken

It was clear in every panel, discussion, and meeting at the Summit: we’re at a watershed moment in pharmacy benefits. There’s no denying that the system is broken on a fundamental level and effectively ‘non-functional’ in its ability to help patients and source drugs at cost-effective prices. The primary cause? A systematic lack of transparency.

Legacy PBMs operate on a model where opacity is its profit driver, generating massive margins for them as middlemen, but unsustainable costs for everyone else involved. This leads to economic hardship not only for employers and members, but also for independent pharmacy owners. Panelist Benjamin Jolley, pharmacy owner and Senior Fellow at American Economic Liberties Project, detailed how legacy PBMs’ biased reimbursement policies and screwed rebate structures have often forced his pharmacy to sell brand drugs at a loss. 

The system is broken... the math doesn't add up and it pushes bids from other PBMs to go lower than actual acquisition that pharmacies can actually buy drugs at which just screws up the whole market. - Benjamin Jolley, PharmD

Legacy PBMs maintain this exploitive status quo through complex, black-box pricing (and manipulative pricing structures like AWP and MAC) and by using subsidiaries like group purchasing organizations (GPOs) or offshore entities to hide spread. The end result is astronomical out-of-pocket costs for patients, increased pharmacy spend for employers, and more independent pharmacies closing their doors each day—creating pharmacy and care deserts for vulnerable populations.

Takeaway 2: True Transparency Reduces Complexity and Cost 

If legacy PBMs thrive on convoluted contracts and black-box pricing and discounts, then a better future for benefits requires the exact opposite: reduced complexity and true transparency. 

We believe a modern PBM should structure their operations and business with completely aligned incentives. That requires that a PBM is unattached to any other part in the supply chain, meaning they’re free from vertical integration and that their methods for making money are public, straightforward, and fair. At SmithRx, we’ve achieved this through a flat administrative fee, rather than profiting from higher drug volume or prices, so clients can rest easy knowing exactly how we make money.

In addition to simple business structures, modern PBMs need to prove clear value through transparent reporting. In her BAM keynote session, SmithRx SVP of Customer Success, Joy Gilbert walked through how a truly modern PBM should ‘show its math’ when working with businesses:

• 100% Pass-Through Rebate Policy: A modern, fully-aligned PBM should pass through 100% of manufacturer rebates and other discounts directly to clients and members (and have the reporting to show for it).

• Lowest Net-Cost, Executional Focus: Legacy PBMs have lulled many employers into a false sense of security by reporting on the amount of ‘discounts’ they’ve gotten for clients. In reality, they’re not optimizing for the best price drug, so discounts look impressive on paper. Additionally, they’ll report on the savings opportunities they’ve identified, but many of those are never actually realized when patients fill at the pharmacy. A modern PBM should be focused on identifying the lowest-cost drug and then handling outreach to ensure that it's the one patients are actually filling at the pharmacy. 

• Complete Data Access and Control: Transparency means putting clients in the driver’s seat of data access. Employers should have real-time access to data on financial performance, cost savings, rebates, and the mechanics of their plan.

We believe that the data is critical. At the end of the day, you can't improve something that you can't measure or see. - Joy Gilbert, SVP of Customer Success, SmithRx

Takeaway 3: Execution is Key to Driving Cost Savings

A huge theme at the BAM Summit was action. This doesn’t just mean the actions that individuals can take to help reform the PBM space, but also how benefits managers need to be action-oriented, or executional, to realize meaningful savings for clients. 

Execution is a crucial differentiator in generating tangible results and moving beyond the unfulfilled savings promises of legacy PBMs. 

Other PBMs are touting that they have access. They're touting that these biosimilars are available. But are they actually moving the members? It's the execution that sets us apart. - Joy Gilbert

For Joy Gilbert’s team at SmithRx, this means optimizing for measurable, repeatable, and scalable execution of the lowest-cost drug option. This commitment to lowest-cost execution is best illustrated in our programs, like our Connect 360 Programs for Humira and Stelara biosimilars. Using clinically-informed formularies and strategies to actively move patients onto alternatives like biosimilars, a modern, execution-focused PBM can deliver the effective treatments at a fraction of the cost to employers and members.

Takeaway 4: Exceptional Service is Crucial to Success

In the various discussions of what’s wrong with pharmacy benefits today, the sub-par patient experience came up again and again. Thanks to legacy PBMs often outsourcing service and support, there’s often no accountability when things go wrong—and patients are hurt in the process. 

In contrast, modern PBM players, like SmithRx, have taken a ‘hands-on’ approach to member service and success. SmithRx SVP of Customer Success, Joy Gilbert's background in luxury hospitality has bled into her team’s philosophy when it comes to providing above and beyond service to members. Her staff are empowered to treat PBM service like a concierge experience: no ask is too big. In practice, this means a PBM gets in the driver’s seat to ensure lowest-cost drugs are accessible where and when patients need them. Joy’s staff often call pharmacies to resolve claims issues for patients, enroll members in copay cards, and connect the dots so members don’t have to stress about getting their medications.

What’s more, this philosophy has been taken to heart at every level of Joy’s service organization. Jarod Smearer, SmithRx Member Support Quality Assurance Specialist, elaborated, "I would compare this job honestly to more of a hotel concierge service as opposed to an actual insurance company because of the amount of effort that we put on behalf of our members."

Takeaway 5: Advisors Need to Break the Legacy PBM Mold

The final message that came up time and time again at the BAM Summit was one of unity. It isn’t on any one person or organization to fix pharmacy benefits, it’s going to take a village. Brokers and insurance managers have a crucial fiduciary role in choosing transparent options for their clients. The more employers that end up moving to modern PBMs, the better, because the fight against legacy PBMs remains an uphill battle against entities that control the market.

There are fiduciary lawsuits going on left and right where there's getting more and more pressure from plan members to make sure the fiduciaries are doing their job right. Kick the tires. Look at other options. - Dr. Erin Albert, MBA, PharmD, JD, DASPL, Chief of Pharmacy Relations, Network and Privacy, Mark Cuban Cost Plus Drug Company

The power to enact change lies with employers and the consultants who advise them. SmithRx and its partners are actively working to change industry status quo and provide an exceptional, transparent experience so that dealing with PBMs can be fair, simple, and affordable. Want to be a part of that future? Speak with a member of our staff today.