Transparency is a hot topic these days. Americans are searching for transparent drug pricing, transparent hospital pricing, transparent broker revenue, and more. Vendors are lining up to address this issue. Sometimes that’s responding to legal mandates for reporting. Sometimes it’s sales spin to meet market demand. And sometimes it’s actually a few companies that do business differently.
This is clearly an issue that most corporate health plan managers want to address. But how does a corporate buyer tell the difference between real transparency and the so-called variety?
When a broker says, “We often get paid more by insurance companies than we charge you for those services,” is that being transparent? On top of that, the explanation to any follow-up query as to the specific amount will likely include some variation of, “It’s too complicated to give you a specific number.” Which leads to the question, is a conflict of interest okay as long as it’s disclosed?
How about when a PBM says, “We will pass-through all of the rebates we receive from the drug manufacturers,” followed by a long list of exceptions. That’s transparent too, isn’t it? You wouldn’t mind if they don’t disclose how much revenue they keep at the rebate aggregator level (which they often own, by the way), or how much revenue they get from manufacturers that they don’t categorize as rebates. Is this being transparent? Again, that depends on your definition.
Most PBMs are willing to disclose that they make money on spread pricing (what they charge plans and their members over what they pay participating pharmacies). Is this enough to be transparent? Do they need to reveal how much? Is it fair to ask them what they pay their own pharmacies versus what they pay other pharmacies? Or is that a level of transparency above and beyond what the buyer should expect?
It always strikes me as funny when a PBM says, “we will pass through 100% of the rebates we receive,” but is unwilling to share those amounts on a claim-level basis. That doesn’t seem very transparent. They go on to tell you their rebates are so good that expensive brand drugs actually cost less than generics after you take into consideration the rebate. Which is impressive until you ask to see the numbers and they not-so-graciously decline.
Believe me, it’s a real game-changer when you get to see claim-level information — a perspective that enables a plan sponsor to make much better decisions. Ironically, PBMs that show claim-level cost and rebate information also make very different decisions than those who hide that information.
Will new government-required reporting solve the transparency problem? It doesn’t seem like it. In spite of what you may have been told elsewhere, there’s still enough complexity in the system to keep things opaque. And far too many are profiting handsomely from it.
So, where does that leave you as an employer/plan sponsor? While you can’t single handedly fix a large, broken system, you can take the necessary steps as a plan manager and change your arrangements to work with a more transparent PBM and conflict-free broker/consultant.
Interested in exploring how you can have a truly transparent arrangement? Contact Rick Chelko for more information.