Reimagining the Traditional PBM Model to Control Drug Costs

At AMCP Nexus 2021, Jason Borschow, founder and CEO, Abarca, explained the rationale behind Assura, a new product that will make the pharmacy benefit manager accountable for changes in list prices and increase drug spending transparency for payers.

Jason Borschow is the founder and CEO of Abarca, a pharmacy benefit manager (PBM) and technology company founded in 2005 and based in San Juan, Puerto Rico. Health care is a part of Mr Borschow’s DNA. He grew up in the business working at Borschow Drug, a medical supply company started by his grandfather in 1951.

Straight out of college, Mr Borschow launched Abarca, a pharmacy benefit management company, with an entirely different approach to business and technology, and a corporate culture unlike any other in the industry. It was a bold move: the PBM space is dominated by a few very large, entrenched companies. He also started other successful health care enterprises.

In 2018, EY recognized Mr Borschow for his vision, willingness to take on the industry giants, and dedication to improving the health care experience for everyone by naming him one of the 2018 Entrepreneur of the Year honorees. The following year, he was selected as the first Puerto Rican Endeavor Entrepreneur, joining a global network of high-impact entrepreneurs.

First Report Managed Care had the opportunity to speak with Mr Borschow at AMCP Nexus 2021 about Abarca’s latest work.

Can you describe Abarca’s shift in policy regarding its new approach to business partnerships? What are some key differences between the new plan and the old?

Recently, we unveiled a new product that we call Assura, which changes the financial model between our customers and us as the PBM. How is it different from what exists today? PBMs today are generally administrators.

Many PBMs are operating based on an opaque business model, where they are pocketing large spreads, or all the savings that they generate from their negotiations do not make their way into their customers’ pockets.

They promise big rebates and discounts, but at the end of the day, payers are wondering, “Why do my per member per month pharmacy costs keep going up? Why do I keep seeing these significant trends over time?” The PBM has no accountability around that.

Our model Assura is a game changer. It is different because we are taking on the responsibility to control drug costs in real dollars, in terms of the cost per prescription.

Other PBMs are guaranteeing discounts and rebates. We are guaranteeing the net result of all those inputs. We are basically saying, “We know we’re going to put our money on the line here. We’re going to put our skin in the game to make sure that you can have that trend management and cost control over time.”

How do we do it? We do it through transparency. Unlike others who have tried implementing similar models, we disclose to the client how much money we are making or losing as part of this arrangement. That is completely different.

Finally, we did not want to overwhelm or ruin a great idea like this with fine print. Other PBMs come out with these big press releases, but when you start to look at the model, you realize that there are so many exceptions, exclusions, and caveats that it is self-serving, and the model does not mean anything.

We are including all drugs, including specialty drugs, in these guarantees. We are not limiting guarantees by class, but we are taking on the risk of changes in the mix of drugs. That is something that no PBM has done.

You just touched on the need for this, but why now? What inspired this decision to come down when it did?

We think that the market is ripe, ready, and screaming for this. The frustration of the PBM business model has been unraveling over the last decade. There has been a push toward transparency, results, and accountability.

Abarca serves over 4 million people. We manage over $5 billion in drug spend. We have the scale to deliver on something like this and not lose our shirts. We can create more value and share in the benefits of that value, something that you cannot do when you are a start-up PBM.

How do you think this shift will impact the future of drug spending and related policy?

We think that it is going to break the trend. We think that, right now, the reason why you see prices continuing to rise is because the current model that focuses on maximizing discounts and rebates does not really minimize that trend. What it does is inspire pharmaceutical companies to raise the list prices.

With this model, we are on the hook for the increase in the pharmaceutical companies’ list price. I will say that again: we are the first PBM that is taking on the true risk of the pharmaceutical’s list price. Other PBMs just want to point the finger at pharma and say, “They need to give us more rebates.”

As more payers begin working with folks like ourselves, who are focused on bending the cost curve and not maximizing rebates, price trends will start coming down. I think that pharmaceutical companies are going to start reducing their inflation increases because there is going to be accountability around value.

There is a lot of legislative debate and public outcry right now about how much people are spending on drugs. In your opinion, what should payers and PBMs be keeping top of mind as the landscape continues to change?

Payers and PBMs need to become agnostic to rebates. The pushes toward rebates mandated at the point of sale or similar models are actually healthy.

It is unfortunate that reform needs to come from Washington. It is difficult for them to come to an agreement on something so complex. We decided we are going to go first.

Our model is a net-cost model. It does not factor in rebates. It is about simplification, where you take all these levers out, and the client does not have to worry about it. We need to start from the industry, not wait till Congress or state legislatures change the rules.

Is there anything else you would like to add?

This model is focused on the financial piece. You might ask, “What about the patient experience, the consumer experience? What about patient outcomes? Is there going to
be rationing?”

In this model, we are not on the hook for utilization. The payer is going to retain that risk. We do not have an incentive for people to take fewer drugs or ration care. We just have an incentive for people to make the most value-based decision over time.

This is not something that we believe is
going to have a negative impact on patient outcomes. In fact, as we create more predictability and control around drug costs, that leaves more money for payers to invest in more benefits that are better for members. In the long term, we think that this is going to improve outcomes.