Pharmacy benefit managers (PBMs) have long been a cornerstone of the pharmaceutical industry, acting as intermediaries between drug manufacturers and health insurance plans. However, recent research and industry trends have brought to light some concerning practices within traditional PBMs. In contrast, transparent PBMs like MakoRx are emerging as a beacon of hope for employers and patients alike.
The Changing Landscape of Traditional PBM Profitability
Traditionally, pharmacy benefit managers have generated revenue through spread pricing and rebates. Spread pricing refers to the difference between what PBMs charge health plans for drugs and what they reimburse pharmacies for those same drugs. This can result in significant markups on drug prices, with the pharmacy benefit managers pocketing the difference as profit. Rebates refer to payments made by drug manufacturers to PBMs in exchange for preferred placement on formularies and increased utilization of their drugs. While these practices have been the norm for years, they have recently been scrutinized, even by Congress, for lack of transparency and potential conflicts of interest.
The Rise of Fees and Specialty Pharmacies
In response to this growing public concern, some PBMs have shifted towards a fee-based service model. However, these fees can still be opaque and difficult for employers and patients to understand. In addition, the rise of specialty pharmacies – which typically involve high-cost drugs used to treat rare or complex conditions – has created new opportunities for traditional PBMs. While rebates to PBMs continue to grow, fees and specialty pharmacies have become dominant drivers of PBM profits. Since 2012, PBM profits from fees have increased fourfold, and those from specialty pharmacies have more than doubled.
The Evolution of PBM Compensation
Between 2018 and 2022, traditional pharmacy benefit manager fees expanded, and new fee sources emerged. Nephron Research states that total PBM compensation tied to fees doubled from $3.8 billion in 2018 to $7.6 billion in 2022. This surge was fueled by traditional administrative fees and the introduction of new data and PBM contracting entity fees, which grew from near zero in 2018 to over $1.7 billion in 2022. This evolution highlights the need for greater transparency in PBM pricing and compensation structures.
The Link to List Prices
A crucial nuance to understand is that PBM fees are often tied to list prices. This link is seen as a barrier to manufacturers’ ability to reduce list prices, further complicating the pricing landscape. In contrast, transparent PBMs like MakoRx have opted for a flat-fee structure that is not tied to list prices, enabling manufacturers to lower their drug prices without impacting PBM profits. This approach aligns with the goal of providing affordable and accessible medications for patients.
Reduced Transparency and Fee Pass-through
Traditional pharmacy benefit managers often lack transparency in their pricing and fee structures, making it challenging for employers and patients to understand the true costs of medications. This lack of transparency may lead to inflated drug prices and unnecessary expenses for both parties.
Furthermore, traditional PBMs may also engage in “fee pass-through,” charging clients additional fees without clearly disclosing them or providing any added value. This practice can result in excessive profits for the PBM and higher costs for employers and patients.
The Dominance of Specialty Pharmacy
Specialty pharmacy, including compensation from payors and manufacturers, is now the most significant growth component, accounting for 39% of PBM profits. This shift highlights the significant role of specialty drugs in the pharmaceutical market and the potential for traditional PBMs to capitalize on this trend. Additionally, since specialty drugs often come with high price tags, traditional PBMs may be incentivized to favor these medications over more cost-effective options.
Why MakoRx Is the Future of Transparent PBMs
Transparent PBMs like MakoRx prioritize the needs of patients and employers over profits. By not relying on rebates and passing all specialty drug savings onto the employer, MakoRx ensures a fair and transparent pricing model. The following are some key differentiators between traditional PBMs and MakoRx that demonstrate the potential for a more transparent future in the PBM industry.
No Hidden Fees
MakoRx operates without the hidden fees that have become prevalent in the traditional PBM model. This transparency ensures that employers understand exactly where their money is going. MakoRx also does not engage in “spread pricing,” instead we only charge the wholesale cost of the medication plus a fair dispensing fee to the pharmacy.
Our pharmacy benefit services are simple and clear, making it easier for employers and patients to understand the costs associated with their medications.
Passing on the Savings
MakoRx’s pricing model ensures employers receive all savings from specialty drug discounts. This approach completely departs from the traditional PBM practice of keeping a portion of these savings for themselves. By passing on specialty drug savings, MakoRx is helping to reduce costs and make medications more affordable for patients.
A Commitment to Transparency
With the pharmaceutical industry’s evolving landscape, transparency is more critical than ever. MakoRx is committed to providing clear, upfront pricing without the hidden costs that have become synonymous with traditional PBMs. This commitment to transparency is crucial in building trust and ensuring employers and patients can access affordable medications without breaking the bank. MakoRx is also committed to sharing the data with a plan sponsor, so they’re able to make actionable and informed decisions based on their employee population.
Experience the MakoRx Difference
Are you tired of hidden fees and lack of transparency from traditional PBMs? It’s time to make a change. Sign up with MakoRx today to experience the difference a transparent PBM can make for your business and your employees. Let us help you navigate the complex world of pharmacy benefit management with clarity and fairness. Together, we can make affordable medications a reality for all.