Why Transparency Matters: Helping Brokers Understand Drug Pricing

Brokers play a key role in connecting employers with health care coverage options, including facilitating affordable prescription drug benefits for employers, which are a leading health care cost. In California, prescription drugs accounted for 11.2% ($60.36 per member per month) of the health plan premium in 2021, after manufacturer rebates. Health plan spending on prescription drugs in California has skyrocketed by $2.1 billion since 2017, including an almost $700 million increase in 2021 alone. With this trend projected to continue, employers and brokers are eager for a solution.

The current pricing models are largely closed networks of information, with brokers relying on imperfect information and incomplete data that limits their ability to advocate for employers. The model needs to change, but it can only happen if we empower brokers with information that better explains the true cost of drugs. Ultimately, transparency will benefit employers and their employees, while increasing value to the brokers’ role in evaluating and recommending health care options for their clients.


The three biggest concerns for brokers and employers today

Brokers and employers face three big challenges with drug pricing: lack of cost transparency, escalating prices, and an explosion of new drugs and expensive specialty therapies. Transparency is at the forefront of reform efforts, evidenced by the number of pharmacy benefit manager (PBM) hearings and the plethora of bills introduced by Congress this year.

About half of drug prices have been outpacing inflation in recent years. Specialty drugs and emerging therapies are exploding in both volume and price, contributing to the trend of prescription drugs making up a greater percentage of the total health insurance cost than before. Value-based pricing, where real-world evidence is used to determine effectiveness for each patient using the treatment, is not yet the nor,m despite years of interest. This leaves employers vulnerable to paying for drugs that may not be the best therapeutic option, combined with employees clamoring for drugs they hope will improve their health. Brokers are then left trying to explain to employers increasing costs associated with expensive, potentially transformative drugs. And how much employers are willing to absorb is unknown.


What else should brokers be thinking about?

Brokers must show employers the value of their offering, presenting comprehensive information on pricing and effectiveness. They must also validate how they are improving employee access and outcomes, while maintaining sustainably affordable offerings. Employers look to brokers for help with information that supports the return on investment and year-over-year metrics that quantify value. But brokers can only provide their analysis based on the limited data they have.

New technology is key to enabling greater transparency. Brokers are doing their best to share prescription drug costs on old-fashioned spreadsheets, calculating list price, average wholesale price (AWP), rebates, and other discounts. There’s only so much that brokers can do when the foundation for the pricing data arrives inflated and obscured, making it impossible to know what drives the original pricing. On top of that, rebates, commonly used to lower employer costs, have actually been shown to raise drug prices. With convoluted pricing schemes and opacity, pharmaceutical manufacturers and PBMs are better able to maintain a hold over higher drug pricing.

How brokers and employers can thrive with transparency

Brokers want to make health care sustainably affordable, but don’t always have the ability. Greater transparency in data and price points will allow the brokers to better evaluate efficacy and value correlations that can save employers money while addressing emerging employee medical needs. But, gaining access to data sets showing how the prescription drug model is structured, including how much PBMs are taking for themselves and drug costs with and without rebates, is more difficult than it sounds. It’s vital to let brokers and employers have full visibility into actual pricing, along with quality, safety and efficacy data, to know what they are paying for. This   will equip employers with the right information to make the best decisions around pharmacy benefits for their employees. Without visibility into the manufacturer’s starting price for medications, it’s impossible for brokers, employers, and plans to work together in providing healthcare at the lowest cost.

Empowering brokers to move toward a transparent model may require a different arrangement to bridge any payment gaps involving rebates. Health plans can, and must, be part of the solution. Health plans are uniquely equipped to negotiate value-based contracts directly with pharmaceutical manufacturers for the lives they cover, and setting up these direct arrangements removes players who may not provide enough value to justify their additional costs. And, brokers and health plans will have to work together to figure out how to price and compare these new value-based contracts in a world where rebates are still the norm. Brokers can help with more than the numbers.  They can share data with plans on how they can make members’ lives easier and improve their health plan offerings, e.g. by using mail-order pharmacies, innovative specialty drug solutions, or other patient-centered programs. Doing so can help slow premium growth and better overall member experience, promote medication adherence, and improve health outcomes. While there are no “silver bullet” solutions yet for burgeoning specialty medication prices, stakeholders will only succeed by working together to seek out innovative opportunities.

To put it simply, the status quo isn’t working. To reach their highest value in the market – and therefore provide patients with the most sustainably affordable care options – we must arm brokers with more comprehensive and transparent information to effectively contain costs for health plans, employers, and patients.


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