Market consolidation has hit the employee benefits solution space with organizations merging to drive market share, increase their customer base, and expand their product portfolios. Typically, mergers and acquisitions are a natural strategy for growth and expansion. But in a space driven by the need for transparency and objectivity, what happens when the agnostic third-party, who’s responsible for supporting their client’s best interests as they navigate their employee benefits options, has vested interest in who wins the contract?
How Does this Market Activity Affect Transparency
This trend of market consolidation is not new, and certainly not new in the pharmacy space. For the past decade, vertical integration has been one of the primary contributors to the significant price hikes across prescription drugs, creating a greater need for plan sponsors to control pharmacy benefits and manage pharmacy spend.
But with the complexity and intricacy that comes with optimizing these benefits, there enters a need for third-party partners with deep expertise to help navigate the nuances of pharmacy.
At first, the emergence of these types of partners offered plan sponsors and their brokers a way to manage benefits with an objective, transparent point of view. But with more and more market consolidation in the pharmacy industry, the business models of these partners have transformed and so have their interests. Now, rather than being an objective third-party, these partners now have ties to the end seller: PBMs. Given these relationships, plan sponsors must understand how contracts are constructed and where the ultimate value is derived – and at what cost to the plan and its members.
What Plan Sponsors and Brokers Can Do About it Now?
Managing pharmacy benefits is largely about ensuring members have access to prescription medications while the Employer or Plan Sponsor manages the risk and cost containment strategies. Complex challenges sometimes evoke complex solutions but here are some steps to help demystify the complexity and stay in control of your pharmacy benefits plan:
- Partner with a trusted, agnostic solution provider
- Understand how your pharmacy benefit partner’s business model impacts your pharmacy program
- Leverage data and insights to develop your unique price optimization requirements
- Add an element of competition to your bidding process to expand your options
It is critical that Employers and their broker partners not only strive to understand these challenges but also constantly evaluate their solutions, the methodology and relationships of their partners in navigating this ecosystem.