By Del Doherty, PhD, PharmD, MBA, MPH, ProdigyRx
PBMs became major players in workers’ compensation by helping payers provide regulatorily compliant pharmacy programs for injured workers and controlling prescription drug costs. They improved patient access to medication, organized pharmacies into networks and reduced payers’ administrative burden. Even as the broader healthcare industry exploded into a disjointed and siloed quagmire, PBMs maintained an organized system that improved patients’ health through well-designed clinical solutions, pharmacist and physician intervention programs to guide patient care, and served as a true counterbalance to the pharmaceutical manufacturers. In addition, PBMs were great partners to payers who entrusted oversight of their entire pharmacy programs to PBMs and PBMs prevailed in delivering competent solutions for payers.
In recent years, though, their good deeds have been diminished by a litany of payer grievances and villainization (some unfair). In workers’ compensation, PBMs were caught off guard by the compound drug debacle and slow to respond to the opioid epidemic in a meaningful way. And they delivered an anemic response to the rising storms of topicals and physician dispensing.
In fairness, the genesis of these storms was outside of PBMs’ control. But these storms are increasingly predictable, and their clinical and financial damage is therefore increasingly preventable. Even more breathtaking, some workers’ compensation PBMs hide behind regulatory “restrictions” to excuse their laissez faire approach to these issues. This explains why PBMs have gained the rather inflammatory reputation as mere “middlemen.”
Then why has there been no significant change despite the outcry from payers and admonition, if not outright threat, from regulators? Now, as PBMs’ Gilded Age draws to a close, what role will they play in its Renaissance?
The New Generation of PBMs
Roles are rarely conceived in a vacuum; they are a response to a perceived structure or lack thereof. Accordingly, the narrative of the next generation of PBMs has been framed by decisions made by incumbent PBMs and new entrants in addition to generally accepted assumptions about the future of workers’ compensation.
For example, mergers and acquisitions have produced larger and more complex PBM structures that sometimes vertically integrate with third party administrators. This fundamentally changed the market’s landscape and structure. In response, smaller PBMs used their independence and flexibility to differentiate themselves and have pulled the industry toward more transparency and price competition.
Still, one cannot assume that this fragmented world on its own will engender a new egalitarian system that caters to patients, empowers payers, fosters innovation, and promotes competition. This kind of system must be carefully crafted through consensus, which is unlikely, or market conditions that force a paradigm shift.
Tidal winds from rising drug prices, the growth of high-impact specialty drugs, practices such as physician dispensing, and changing regulatory landscapes signal a market shift. The value story of traditional PBMs will continue to come under assault from a confluence of concerned voices and competition from small, aggressive companies, the “NextGen PBMs.”
The currently unchallenged power of large and vertically integrated PBMs will diminish as payers gravitate to new PBM business models that are transparent and open, easily understood, and offer more personable solutions that serve patients first, profits second. Armed with a barrage of innovation and an army of hardworking team members seeking to change the status quo, the NextGens will drive the industry’s agenda for decades. Fierce competition and rapid change will characterize the PBM Renaissance.
Some observers suggest that NextGen’s innovation prowess alone will catalyze change. This is not only wrong, but an amateurish illusion. Innovation is a necessary condition for change, but it Is insufficient when stifled by poor execution.
It’s All About the Patient
Patients are the primary reason why PBMs exist. This assertion is true for every segment of pharmacy and remains valid for every sector of the healthcare industry. Forget this rule and start the countdown to irrelevance. The return to an unwavering focus on improving patient outcomes through well-designed clinical programs is the most logical factor that will dictate prominence in the new era. Additionally, as a key differential, PBMs must leverage the appropriate technology and tools to deliver these solutions conveniently and flexibly with respect, empathy and dignity.
The NextGens that rise to prominence in the PBM Renaissance era will be those that can seamlessly combine all of these factors into creation of great products and services that focus on improving patients’ lives and supporting payers to do so. This requires creating highly disciplined, streamlined organizations that participate only in specific, closely related markets where they can consistently innovate, solve complex problems and make meaningful contributions. In addition, these NextGens will espouse a culture committed to strategic partnerships and the ability to collaborate with providers, pharmacists, and claim professions to provide the best clinical solutions for patients.
The real challenge to the PBM Renaissance is how to change the current model that measures a PBM solely on its ability to reduce drug spend, e.g., savings below fee schedule, to one that is focused on the patient and measures its ability to maximize value, e.g., appropriate prescribing, improved clinical outcomes and value-based contracts. Like everyone else, NextGens need to prove themselves worthy of payers’ trust and this will be the real test.
About Del Doherty, PhD, PharmD, MBA, MPH
Del Doherty oversees the development, operations and clinical services of ProdigyRx, a pharmacy benefit manager that delivers patient-centric clinical services and pricing transparency to workers’ compensation payers.
A PharmD with a second doctorate in Pharmacoeconomics, Doherty also holds an MBA and a master’s degree in public health (MPH). He has over 15 years of experience in healthcare and pharmacy, working in managed care, workers’ compensation and group health PBM services, as well as independent pharmacy network management. Doherty has also served as a consultant to both group health and workers’ compensation PBMs.
In addition, Doherty has provided direct patient care in inpatient and retail pharmacy settings–and occasionally still does to stay in touch with this side of the industry.
Doherty earned his Doctor of Pharmacy (PharmD), Doctor of Pharmacoeconomics and Master of Public Health degrees from the University of Minnesota. He also has a Master of Business Administration MBA degree from Rice University in Houston, Texas.
Doherty has served on the faculty of Wartburg College in Waverly, Iowa for over eight years, teaching Nurse Practitioners and Physician Assistants. He is on the Board of Directors of Remedium Healthcare Services, which provides home health care services. He also serves on the Board of Wartburg College and on the Advisory Board of Axum Rx, a specialty drug company.
About Prodigy Care Services’ ProdigyRx
ProdigyRx is a pharmacy benefit manager (PBM) that delivers patient-centric clinical services to injured workers and pricing transparency to workers’ compensation payers. Prodigy’s founders have decades of experience in clinical pharmacy, workers’ compensation, group health, along with PBMs and other ancillary clinical services. ProdigyRx was established to give workers’ compensation payers better control over their pharmacy costs through access to its intuitive technology platform, integrated tools and strategic oversight. Pass-through pricing, proactive clinical controls, and a suite of evidence-based clinical tools are among its offerings. Its parent company, Prodigy Care Services was founded in 2020 and is based in Austin, Texas, and serves clients throughout the U.S. Website: www.prodigyrx.com.