Policy Options to Help Employers Improve PBM Contracting Efficiency


PBGH’s partners on the waste free formulary part II project (Johns Hopkins University) penned this excellent article about PBM contracting. The Lower Healthcare Cost Act, to which PBGH contributed, holds promise for “fixing” a broken PBM business model.

“Under the Lower Health Care Costs Act, PBMs could still use rebates as their price negotiating tool with drug companies (but completely pass through rebates to employers). But since PBMs could no longer financially benefit from rebates and would have to compete on delivering low net prices to attract employers’ business, PBMs’ motivation to negotiate low net price with drug companies would likely be enhanced. In response, drug companies would likely offer low net prices to secure favorable formulary placement. As PBMs’ preference for high-price, high-rebates drugs diminished, drug companies would likely have less incentive to increase the list prices or develop low-value drugs, which would generate further savings for employers and employees.”

- Policy Options To Help Self-Insured Employers Improve PBM Contracting Efficiency