Today, more than 85% of the PBM market is controlled by three companies that happen to be owned by very large health plans. This puts other payers in a position where they are partnering with–and turning control over their pharmacy benefits to a large and formidable competitor.
Those who are averse to this type of arrangement often respond by:
- Choosing to work with independent PBMs,
- Building or buying a PBM, or
- Selectively insourcing PBM functions using internal resources or a la carte services from independent PBMs/technology partners.
Health plans have shared with us a number of priorities for their pharmacy benefit, including: evidence-based and timely clinical edits, better member engagement, and a more powerful and interoperable technology platform.
But, above all else, we hear that health plans want more control over their businesses and insourcing is one way to achieve that goal. However, evaluating and implementing an insourcing model can be challenging.
Here’s where we recommend plans begin:
- Assessing the plan’s ability to provide certain PBM services.
- Identifying functions that could be strengthened by insourcing with either internal resources or from PBM(s)/technology partners.
- Understanding the technology necessary to implement these functions, and whether it can be obtained through a PBM or technology partner.
- Structuring an agreement that allows for increased insourcing over time.
Some functionalities are more suited, and more cost-effective for insourcing than others. For example, insourcing rebate aggregation would be easier and generate more savings than claims adjudication.
The value of insourcing will grow as it becomes more widespread in the industry. As more choices and competitive models emerge, insourcing will introduce flexible, customized PBM solutions that will eliminate conflicts of interest and foster innovation.
The PBM industry has never been more primed for this kind of shift–and it is time that plans and members get to reap the benefits.
This blog was written by Javier González, PharmD, Chief Growth Officer at Abarca based on his presentation at the 2021 PBMI Annual National Conference. To download the full presentation: Abarca Health – “Insourcing: The Future of Pharmacy Benefits” presentation by Javier Gonzalez.