PBMs are the Health Plan Industry’s Achilles Heel

In this Golden Age of government programs, the health plan industry has never had more exposure to the generally poor performance of pharmacy benefit managers (PBMs).  Performance metrics in Medicare, Medicaid and ObamaCare are directly tied to PBM execution, and the recent track record of these companies means they are the Achille’s Heel of insurers.

PBMs historically made most of their money on commercial insurance and have lagged on government programs, a trend exacerbated by a brain-drain of talent following a wave of PBM consolidation.  The danger has never been greater for health plans, and their choice of vendor has never been more important.

First, Medicare’s Star Ratings system has several critical performance measures directly tied to PBM performance, notably those related to drug plan service, formulary administration, patient adherence to drug therapies for chronic diseases like hypertension, and readmission prevention (many hospital readmits are due to drug over/underdose post-discharge). The numbers don’t lie: Medicare Part D Star ratings and formulary administration were the two leading reasons for CMS-mandated corrective action plans dropped on insurers in the last year.  Of plans scoring less than 2 Stars by performance domain, Drug Plan Customer Service came up worst in CMS’s last review cycle — followed by Member Experience with the Drug Plan, and Member Complaints, Problems Getting Care, and Improvement in the Drug Plan’s Performance.  It’s a dismal record and getting worse.

Then consider that the two critically-important health plan quality improvement measures — C33 and D07 — are now weighted 5, a first for CMS and a huge development. The concern here is that PBMs are often terrible at data management, and under these measures a plan can be reduced to 1 Star where mishandled data resulted in bias or error, or where appeals and grievances handling is in question. With that 5-weighting, this has come as a rating killer for several plans and a major vulnerability for the rest, as most don’t keep good logs of non-compliance issues or audit results.

PBMs are generally good at managing the drug benefits of commercial members, but the complexity of seniors and the low-income and the previously uninsured continues to confound these companies.  Gorman Health Group ran 15 solicitations for government program PBM services for its clients in the last 12 months, and we wouldn’t wrap fish in one of the responses we received. All varying degrees of suck.

In this last round of contract and service area expansions for 2015 Medicare Advantage and Part D, in our 18 years we have never seen more rejections due to PBM failings like pharmacy and home infusion network adequacy — literally dozens this cycle, due both to PBM sloppiness and a new resolve at CMS to directly address it.

As PBMs continue to consolidate, plans need to protect themselves from weak execution by bringing renewed focus on PBM-directed Star ratings measures and most importantly, inspecting what they expect.  The delegation oversight plan for this vendor is the most important document in compliance right now.  Payers are now literally at the whim of the government programs sophistication of their PBM account manager, and that is not a comfortable place to be with literally billions of dollars and millions of seniors and the vulnerable hanging in the balance.

PBMs need to awaken to the new reality of the primacy of government programs today, and make a serious commitment to catching up.

This blog was originally posted on blog.gormanhealthgroup.com.

John Gorman: Under John’s leadership, Gorman Health Group has become the leading professional services and solutions firm for government-sponsored health care, providing thought leadership and expert strategic, operational, and technology-based solutions. Read more.