Toward Better Value

Employer Perspectives on What's Wrong With the Management of Prescription Drug Benefits and How to Fix It


According to a new study conducted by Benfield, a division of Gallagher Benefit Services, on behalf of the National Pharmaceutical Council, there is a disconnect between the important role employers believe their pharmacy benefit managers (PBMs) play in helping to manage prescription drug benefits and employers’ perceptions of the overall value they are getting from their PBMs. Findings indicate that this disconnect is rooted in employer concerns about transparency, contract complexity, rebates and focus on value.

Employers provide health insurance for 56% of the U.S. insured population, making them an important link to improved patient health and well-being. Employers’ choices about benefit design, the vendors they work with and how they manage their contracts all impact employee health. Yet employers that were surveyed or interviewed as part of the study expressed concerns about how they interact and utilize their PBMs and highlighted potential solutions for improvement. These include:

  • Improving transparency: Employers surveyed said that current pharmacy benefit management models lack transparency. Only 30% said they understand the details of their PBM contracts; 40% of respondents said they fully understand their PBMs’ performance guarantees; and 63% said PBMs are not transparent about how they make money.
  • Reducing contract complexity: Among the study findings, 58% of employers think contracts are overly complicated, are ambiguously worded, and often benefit the PBM at the expense of the employer. Utilizing clearer definitions and simplifying the contracts were among employers’ recommendations for improvement.
  • Focusing less on rebates: A majority of employers—69%--indicated that they would welcome an alternative to rebates, such as discounts or point-of-sale rebates, in which patient payments reflect a post-rebate price. Employers acknowledged focusing on rebates as a revenue stream rather than focusing their attention on other important factors such as reducing employee co-insurance or deductible payments, or providing access to the most effective medicines.
  • Getting value for patient populations: Employers want to understand the rationale behind PBMs’ formulary and exclusionary list decisions, such as the clinical, financial and economic impacts; 50% of employers surveyed think PBMs lack transparency about the basis for those decisions. Possible solutions suggested by employers include using value-based insurance design, where high-value drugs cost patients less than low-value drugs, or payments based on the effectiveness of a drug.

Tools to Help Employers:

In conjunction with the study, Benfield and NPC developed tools to assist employers with the PBM assessment process. These tools include:

About the study:

Benfield, a Division of Gallagher Benefit Services, conducted interviews with eight subject matter experts to gather background and guide survey development. They then surveyed health benefit decision-makers and influencers at 88 employers with 5,000 or more employees. The survey assessed respondents’ experiences and perspectives regarding current and next-generation pharmacy benefit management value propositions and business models. They also conducted follow-up interviews with eight survey respondents to provide additional insights related to survey findings. Interviewees were selected to represent a spectrum of experiences and perspectives about current and future approaches to managing prescription drug benefits.