POV - Misaligned Incentives in the Pharmacy Ecosystem

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I just read this article from WTW “Is the Industry Ready for a Specialty Pharmacy Carve-out?” I was very excited by the title because the answer is emphatically YES in my opinion. But I think the article should have been titled ‘Is WTW’s Drug Coalition Ready for a Specialty Pharmacy Carve-out?’

Someone correct me if I am wrong, but doesn’t WTW make money by selling the Rx Collaborative? I’m not calling out WTW as the only culprit here: Aon and Mercer all have similar Rx purchasing collaboratives or coalitions. And they all talk about how specialty drug costs are rising rapidly. But think about it. With the way these collaboratives are organized and sold, aren’t they making more money as the cost of these drugs goes up? How could they ever provide an objective review of whether specialty management solutions, or anything that would dramatically reduce overall Rx costs work? Isn’t there an inherent conflict of interest here?

While WTW, Aon, and Mercer have functioned as unbiased and independent consulting firms in the past, in this case, they really function as resellers when they form these collaboratives and coalitions. They have moved far away from their initial independence by partnering almost exclusively with the Big 3 PBMs – CVS, ESI, and Optum. These group purchasing contracts provide a lucrative revenue stream for the consulting firms that organize them, and create a disincentive for the consulting firm to consider other group contracts or innovations like specialty carve-outs. So, the reality is that we shouldn’t be surprised at all by this article. It makes perfect sense for WTW.

The cost of specialty drugs is such a big problem that some employers are starting to just exclude them. Actions like that create a short-term financial gain but a long-term healthcare problem by excluding access to life-saving drugs that patients need. Employers are interested in finding solutions that could solve this conundrum. Solutions such as giving the responsibility for managing all specialty drugs to a specialty drug carve-out vendor that offers services in a different model. Employers should work with vendors that are aligned with their priorities: finding better care at a lower cost. These new specialty drug carve-out solutions are focused on ensuring that members have access to high value and appropriate specialty drugs, instead of pushing members to a drug because of some opaque pricing scheme.

In fact, I’ve seen data on specialty carve-out solutions in the market that do work, contrary to what WTW is telling us. Many employers who carve-out specialty drugs see reductions in their pharmacy spend by 30-40%. For this reason, carving out specialty drugs is the most significant threat to the Big 3 PBM’s and the Big 3 Consultant-led coalitions’ business model. To be honest, anything that moves from the Big 3 PBM’s is a threat to the Big 3 consultant-led coalitions. And, in my opinion, moving from the Big 3 PBM’s may be the most important thing an employer can do to manage their total drug spend. Yes, it may also be the hardest. Change is extremely hard. I know that first-hand. But change is what makes a difference for your employees and their families and for your corporate health care costs.

EHIR recently published two papers to support employers who are looking at their pharmacy benefits program. They ask the question, “Is your PBM on your side?”. If you are an employer, you should ask yourself this question. If you’re a consultant reading this blog, please, ask yourself, “Whose side am I really on?”. And if you’re a PBM, or a specialty carve-out vendor, then ask yourself, “What are we truly doing to improve health care outcomes, eliminate inappropriate drug usage and reduce overall health care costs?”.

I wish this were the only misaligned incentive in health care. Unfortunately, it is at the core of the problem with overall health care costs in the US. Fortunately, there are steps employers can take to identify opportunities for better pharmacy benefit alignment, and options available to help capture them.

Sally Welborn is a seasoned veteran of the pharmacy and employee benefits space. She currently serves as an Advisor at Welborn Advisory Services, which is based in San Francisco. In addition, she serves as the Executive Director of Advisory Services at of the Employer Health Innovation Roundtable (EHIR).