By Del Doherty, PhD, PharmD, MBA, MPH, ProdigyRx
Part 1: The Gilded Age of PBMs
As a pharmacist, clinician, consultant, and PBM executive, I have participated in this profession with great pride and enjoyed the privilege of making a difference in patients’ lives. But I have also seen this PBM industry’s low moments as I’ve watched it lose its way, leaving its hardworking professionals cynical and patients frustrated.
Some observers believe that the PBM industry’s best days are behind us. This is understandable, given the wave of negative press and Federal Trade Commission (FTC) investigation over potential collusion and unfair business practices.
In workers’ compensation specifically, PBMs have faced lawsuits over unfair pricing and contract violations in Ohio and Massachusetts. PBMs have also been in constant turmoil with pharmacies and pharmacists (especially independent pharmacies) Now there is general patient discontent and a barrage of state laws around transparency, fees, and fairness.
The reality is a bit nuanced because the PBM industry, despite its flaws, has been unfairly villainized in some cases for market conditions that are out of its control, e.g., the rising price of prescription drugs. Even so, it is discouraging that key stakeholders are in denial about the long, arduous decay of the PBM industry that threatens its very existence.
I am not here to castigate nor defend the PBM industry, my objective is to highlight facts to make a strong argument for change that is long overdue and outline a potential blueprint for the Next Generation PBM.
The Backstory
Since inception in the ‘60s, the PBM industry thrived by solving the complex problems that accompanied the expansion of prescription drug coverage in the private sector. Specifically, PBMs developed solutions to efficiently and economically manage the daunting challenges related to high volume, low dollar prescription claims.
In the ensuing decades, PBMs innovated and solved real problems for payers and patients, such as creating the benefit ID card system to streamline patient eligibility. This expanded patient access to prescription drugs by removing the need for upfront payment by the patient. In workers’ compensation, PBMs created regional and national pharmacy networks, standardized contracts, and pioneered real-time electronic drug claims processing, resulting in the frictionless system we have today.
Furthermore, as the pharmaceutical industry exploded with innovative new drugs and the long-term use of medications such as opioids, muscle relaxants and anticonvulsants, PBMs were uniquely positioned to protect both payers and patients from rising drug prices by collaborating with pharmacists to ensure patients receive the best care possible.
Unfortunately, somewhere between 1968 and reporting quarterly earnings on Wall Street in the ‘90s, the industry lost its drive for innovation and solving problems. Instead, it entered a gilded age of arrogance and exuberance, where the quest to create value was replaced by a desire to get bigger through an acquisition binge. Ownership of key segments of the prescription drug delivery chain gave PBMs more control over patients, payers and providers.
Even worse, they’ve leveraged their size and control to constrain decision makers and thwart competition in order to preserve an incumbency of mediocrity. The creativity and innovation that once defined the soul of our industry has been replaced by a hodgepodge of underwhelming features, program gimmicks and an exhausting array of gamesmanship and fuzzy contracts that give PBMs carte blanche.
Call It What It Is
I am a product of this industry and have made a career in service to patients, providers and payers. It is quite painful for me to be this critical about an industry about which I am so passionate. I have defended the integral role of PBMs in healthcare and can attest to the impact PBMs can make for payers, providers and patients.
But the first step to creating change is to admit we have a problem. Our industry has lost its way. Decades of tension over transparency, spread pricing, rebates, and repeated appeals by patient and pharmacy advocacy organizations for legislative oversight threaten the current business model.
In 2019, when PBMs faced increased scrutiny and criticism of their business model, they responded with lofty promises of changes, broadly described as moves toward full transparency and innovation to reduce costs for payers. Yet studies show that controversial PBM practices remain and that business model changes were mostly cosmetic.
The fuzzy definition and deliberately obtuse meaning of transparency in PBM vernacular has done little to solve marketplace dysfunctions and bring tangible change to payers. PBM mergers promising better savings from economies of scale and innovation may have been well received by shareholders, but have not alleviated payers’ frustrations or the concerns of pharmacists, patients, legislators, and some members of Congress.
The Next Generation PBM (NextGen)
The main obstacle to change is not incompetence or lack of technical expertise, but the PBMs’ power to incapacitate payers’ ability to hold them accountable. This underscores the opportunity for the next generation of PBMs that have conceived new business models focusing on building technology and programs that solve real problems for payers.
These models reinforce collaboration with pharmacists and claims professionals to provide the best clinical solutions for patients. They represent a new era that prioritizes empathy and dignity for patients and rewards payers trust with honesty and transparency.
Will the next generation of PBMs occur in our lifetime? Somewhere in this remarkably diverse industry, there is a group of entrepreneurs crazy enough to believe in this model and are chomping at the bit to usher in the next generation of PBMs. I can at least attest to one.
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.