Pharmacy benefit managers, or PBMs, are companies that manage prescription drug benefits on behalf of health insurers, Medicare Part D drug plans, large employers, and other payers. As one function of their service, PBMs work on behalf of their clients to negotiate with drug makers for lower prices. PBMs currently fall into one of two major categories: traditional pharmacy benefit managers or transparent pharmacy benefit managers, each of which has varying means to profit.
Traditional Pharmacy Benefit Managers
Spread pricing is currently one of the primary methods by which traditional PBMs profit. According to the Centers for Medicare & Medicaid Services, spread pricing occurs when health plans contract with PBMs to manage their prescription drug benefits, and PBMs keep a portion of the amount paid to them by the health plans for prescription drugs instead of passing the full payments on to pharmacies. Many traditional PBMs also hold rebates and discounts provided by drug manufacturers instead of passing the full savings along to clients.
Transparent Pharmacy Benefit Managers
In contrast, transparent PBMs like Araya operate based on actual costs instead of employing spread pricing and rebate holding. With the transparent model, clients opt to contract with their PBM to have predictable drug costs for the year by choosing to pay the price the PBM has negotiated with the pharmacies in addition to a separate administrative fee for services provided.
Transparent PBMs also share data with end users, which simplifies prescription drug management and inserts confidence into the business decisions made with and on behalf of clients. Araya is attractive to many clients due to their predictable drug cost structure, data-sharing to empower informed healthcare decisions, and the absence of spread pricing.
Araya
Araya has been in business for almost 25 years and currently serves the self-insured payer market, including municipalities, schools, third-party administrators, and private employers ranging in size from five to 5,000-person businesses. Araya holds no ownership in the distribution channel, has no outside investors, and is also privately owned, which eliminates conflicts and ensures that your success is the primary interest.
Araya’s business model makes it possible to offer you a modular experience. Araya will consult with you to select the most effective combination of services for your plan, so you’re not paying for services you don’t need. Araya’s modular services include Mail Order Rx, Pharmaceutical Assistance Programs (PAP), State Pharmaceutical Assistance Programs (SPAP), Specialty Rx, International Rx, Invoice & Payment, Rebate Management, Third Party Administrator (TPA) Services, Electronic Health Records (EHR), and an On-line Reporting Suite.
References
A Unique Approach: Transparent PBMs, ACHP: Alliance of Community Health Plans, April 2019, PBM-Infographic_4.5.19.pdf (achp.org)
Pharmacy Benefit Managers and Their Role in Drug Spending, The Commonwealth Fund, April 22, 2019 Pharmacy Benefit Managers and Their Role in Drug Spending | Commonwealth Fund.
Press release CMS Issues New Guidance Addressing Spread Pricing in Medicaid, Ensures Pharmacy Benefit Managers are not Up-Charging Taxpayers. CMS. (2019, May 15). https://www.cms.gov/newsroom/press-releases/cms-issues-new-guidance-addressing-spread-pricing-medicaid-ensures-pharmacy-benefit-managers-are-not.
