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Myndshft Blog

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October 4, 2023

Why the Evolving Role of Pharmacy Benefit Managers Increases the Need for Automated Prior Authorization

by Susan Lawson-Dawson | Healthcare Technology, Prior Authorization

Pharmacy Benefit Managers (PBMs) originated during the 1960s in response to the growing complexity of drug benefit programs within health insurance plans. Initially, PBMs’ primary role was to process prescriptions and handle the administrative burden for insurers. As the healthcare landscape evolved, so too did the responsibilities of PBMs, expanding to include drug formulary management, pharmacy network contracting, and drug utilization reviews. And of course, PBMs began using prior authorization to further manage costs. Is it any wonder that providers want a way to automate prior authorizations to relieve the administrative burden?  That’s where a prior authorization platform offering unified medication management—for both medical and pharmacy benefits—offers relief. 

PBMs find themselves in the hot seat over lack of transparency

Fast-forward to today, and PBMs have become far more than prescription processors; they serve as influential middlemen negotiating drug prices between pharmaceutical manufacturers and health insurance plans. However, with rising scrutiny over drug pricing and a systemic shift towards value-based care, the role that PBMs play has come under fire. 

PBMs of the past

Traditionally, PBMs acted as intermediaries, primarily focused on obtaining bulk discounts and rebates in drug price negotiations with pharmaceutical manufacturers. NPR explains, “The industry mushroomed as prescription drug spending grew about 200-fold between 1967 and 2021.”  But as PBMs gained market share and power, promised savings seemed to evaporate. One reason for the power boost: vertical integration. PBMs began to merge with payers or retail pharmacy chains, gaining more say in deciding which medications patients have access to and putting a stranglehold on independent pharmacies. 

PBMs today

These days, three PBMs dominate the marketplace. ​​They face growing criticism for contributing to rising drug costs due to the lack of transparency in rebate negotiations and for pocketing a significant portion of these rebates themselves. This has led to increased scrutiny from regulators and the public alike. Last summer, the Federal Trade Commission (FTC)  launched an inquiry into the PBM industry. In announcing the probe, FTC Chair Lina M. Khan said, “This study will shine a light on these companies’ practices and their impact on pharmacies, payers, doctors, and patients.” You may have noticed dueling drug price ads peppering the airwaves too. Right now, anti-PBM and pro-PBM ads go head-to-head, each accusing the opposing trade group or industry lobby of unfair practices and offering dire warnings for the future of healthcare. 

Hike in regulations likely

Congress, too, has gotten in on the act with 9 pieces of legislation in the works. This past May, the House Committee on Oversight and Accountability held a hearing on the oversized role PBMs play. In a rare show of bipartisan support, committee members emphasized that anti-competitive tactics used by PBMs hurt patients—in terms of both costs and care delays. 

During the hearing, Dr. Miriam Atkins, an oncologist, said, “Unfortunately, the PBM preferred drug is often not the best drug for a patient but the most profitable drug for the PBM… Treatment delays, denials, and fueling drug costs is the PBM hell my patients and I live in every day.” Another hearing witness, independent pharmacy owner Kevin Duane, added, “The three largest PBMs control 80 percent of the market today, which means patients are forced by PBMs into using a certain pharmacy, often one owned and operated by the PBM, or they may be forced to get their drugs through the mail even though they want a pharmacist face-to-face in their community.”

Among the proposed House and Senate bills to address PBMs, three have already advanced out of Committee. On the Senate side, we have The Pharmacy Benefit Manager Reform Act and The PBM Transparency Act of 2023. On the House side, we have The  PATIENT Act of 2023 which includes The PBM Accountability Act, The Promoting Transparency and Healthy Competition in Medicare Act, The Drug Price Transparency in Medicaid Act of 2023, and The Fairness for Patient Medications Act.

Among bills introduced and still under discussion, are: 

  • House & Senate: The Help Ensure Lower Patient (HELP) Copays Act
  • Senate: The Patients Before Middlemen (PBM) Act  
  • House: The PBM Sunshine and Accountability Act  
  • House: Protecting Patients Against PBM Abuses Act

The Senate Finance Committee is also working on details of a PBM Legislative Framework. 

As new laws and regulations push PBMs towards greater transparency, legislative mandates like disclosing rebate amounts and real-time pharmacy benefits will influence how PBMs operate and interact with other stakeholders in the healthcare system. It may even open doors to new opportunities. 

PBMs see growth potential in specialty pharmacy 

With the rise of expensive specialty drugs for complex conditions, PBMs look to carve a niche by providing specialty pharmacy services. They express interest in creating value-based arrangements where reimbursement is tied to patient outcomes, aligning the interests of all stakeholders. Administrative barriers like prior authorization, however, can have the opposite effect. 

With a resolution still in the distant future, adding Myndshft automated prior authorization to your workflow can expedite prior authorizations, regardless of whether the requirements are established by a pharmacy benefit manager or a payer. We are only solution out there that handles prior auth under both medical AND pharmacy benefits. 

Ready to get started?  Connect with Myndshft today.