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On August 17, 2023, Blue Shield of California (BSCA) made a significant announcement that it was unveiling a new model to transform prescription drug care and save millions of dollars annually.
The BSCA announcement resulted in significant ripples in the market. Stock values of PBMs were affected and a number of "industry experts" have weighed in on the significance of the new arrangement. Pharmacy benefits, and the delivery thereof, through PBMs and Healthcare Providers, is a significant matter for careful consideration. Pharmacy care and benefits are now the largest piece of healthcare costs, comprising approximately 35% of total spend. This is expected to grow, given the increase in the cost of specialty drugs. We can expect pharmacy costs could soon exceed 50% of total healthcare costs.
A strong and effective PBM aggregates costs of goods, directs positive clinical outcomes, and drives/enhances the overall member experience. In looking at the limited information available on the BSCA program announcement, I cannot help but ask myself if this is true innovation? The limited facts indicate the following:
We are of the understanding that generics will be negotiated and supplied through Mark Cuban’s CostPlus Drug Company. The Cuban model sounds exciting but there are some issues the industry will have to address. It is common knowledge that margins on generics are higher than those realized on brand, and that these higher margins are cross-applied to offset the losses that many retail pharmacies realize when dispensing most brand drugs. The “savings” on generics could well result in an increase to brand drug costs, and difficulties in negotiating the retail network. While transparency and pass-through of true-net acquisition costs is exciting, in this case, it has significant potential implications for members who must use brand drugs.
We have been working on a number of aggregation, clinical management, pricing, and member experience questions and models for our client base. We realize the importance of pharmacy benefits as a critical issue around access to care. We view access in terms of affordability/health equity, as well as ensuring our clients’ covered populations receive the right care in the right place at the right time.
Clients understand the importance of pharmacy benefits in the care continuum and hold us responsible for “pharmacy first” rather than “pharmacy only” strategies. We are excited by some of the emerging changes in the marketplace and are curious and anxious to see needed change occur. We also realize that the PBMs are needed partners with whom we are better off collaborating rather than confronting. This is not to say that some PBMs would rather keep things as they are and are unwilling to change. However, our practice is to think through and develop strategic initiatives that consider the existing and downstream implications tied to administration, compliance, finance, health equity, and member experience.
We will continue to monitor the situation and assess the potential implications.
Want to discuss further?
Connect with Stuart Piltch on LinkedIn.
Contact the Risk Strategies Consulting team at RiskStrategiesConsulting@riskstrategies.com.
The contents of this article are for general informational purposes only and Risk Strategies Company makes no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information contained herein. Any recommendations contained herein are intended to provide insight based on currently available information for consideration and should be vetted against applicable legal and business needs before application to a specific client.