- Intriguing data on how employers oversee their PBMs
- State Medicaid programs carve out PBMs—and get a 340B windfall
- Are U.S. drug prices really higher than other countries?
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Pulse of the Purchaser: 2024 Survey Results, National Alliance of Healthcare Purchaser Coalitions
File this report under “Things make you go hmmm.”
The National Alliance of Healthcare Purchaser Coalitions (NAHPC) surveyed 188 employers about a broad range of healthcare benefit topics. Opinions on pharmacy benefits start on page 12 of the survey findings.
Page 16 (below) compares employers that reported higher than average premium increases with those reporting lower than average premium increases.
As you can see, employers with tighter PBM oversight had lower premiums. Key differences included greater disclosure of revenue streams, stronger audit rights, and better definitions of such terms as “rebate.”
These results are not conclusive—but they are highly suggestive. As I noted in If Plan Sponsors Are So Unhappy with Their PBMs’ Transparency, Why Won’t They Change the Model?: “There is a small army of consultants and lawyers that analyze PBM relationships, advise on contracting, and assist with negotiations. Plan sponsors should be able to make better decisions—if they put in the effort.”
P.S. Page 20 shows that employers distrust hospitals as much as—or perhaps even more than—they distrust their PBMs.
The National Alliance of Healthcare Purchaser Coalitions (NAHPC) surveyed 188 employers about a broad range of healthcare benefit topics. Opinions on pharmacy benefits start on page 12 of the survey findings.
Page 16 (below) compares employers that reported higher than average premium increases with those reporting lower than average premium increases.
[Click to Enlarge]
As you can see, employers with tighter PBM oversight had lower premiums. Key differences included greater disclosure of revenue streams, stronger audit rights, and better definitions of such terms as “rebate.”
These results are not conclusive—but they are highly suggestive. As I noted in If Plan Sponsors Are So Unhappy with Their PBMs’ Transparency, Why Won’t They Change the Model?: “There is a small army of consultants and lawyers that analyze PBM relationships, advise on contracting, and assist with negotiations. Plan sponsors should be able to make better decisions—if they put in the effort.”
P.S. Page 20 shows that employers distrust hospitals as much as—or perhaps even more than—they distrust their PBMs.
As Pandemic-Era Policies End, Medicaid Programs Focus on Enrollee Access and Reducing Health Disparities Amid Future Uncertainties: Results from an Annual Medicaid Budget Survey for State Fiscal Years 2024 and 2025, KFF / Health Management Associates (HMA)
The latest extensively-titled survey of state Medicaid programs finds growing oversight of pharmacy benefits.
Per the handy map shown below, 8 states now carve out (exclude) pharmacy benefits from managed Medicaid. This figures includes two states—California and New York—with the highest Medicaid enrollment. Three states—Kentucky, Lousiana, and Mississippi—use a hybrid model with only one PBM.
These shifts to fee-for-service are due partly to the disclosures about PBMs’ unexpectedly high spread-pricing profits from managed Medicaid contracts.
However, I think there’s a more crucial explanation: States that switch from Managed Medicaid to fee-for-service (FFS) Medicaid receive a 340B windfall.
That’s because Medicaid FFS reimburses based on 340B acquisition cost, e.g., NADAC. Excluding subceiling 340B discounts and supplemental Medicaid rebate agreements, the 340B ceiling price is equivalent to the Medicaid net price. Consequently, the benefit of the 340B discounts accrues to the state Medicaid program, rather than to 340B covered entities.
For a deep dive on this arcane interaction between 340B and Medicaid, see Section 8.4. of our 2024 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.
Per the handy map shown below, 8 states now carve out (exclude) pharmacy benefits from managed Medicaid. This figures includes two states—California and New York—with the highest Medicaid enrollment. Three states—Kentucky, Lousiana, and Mississippi—use a hybrid model with only one PBM.
[Click to Enlarge]
These shifts to fee-for-service are due partly to the disclosures about PBMs’ unexpectedly high spread-pricing profits from managed Medicaid contracts.
However, I think there’s a more crucial explanation: States that switch from Managed Medicaid to fee-for-service (FFS) Medicaid receive a 340B windfall.
That’s because Medicaid FFS reimburses based on 340B acquisition cost, e.g., NADAC. Excluding subceiling 340B discounts and supplemental Medicaid rebate agreements, the 340B ceiling price is equivalent to the Medicaid net price. Consequently, the benefit of the 340B discounts accrues to the state Medicaid program, rather than to 340B covered entities.
For a deep dive on this arcane interaction between 340B and Medicaid, see Section 8.4. of our 2024 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.
National spending on services and prescriptions, Peterson-KFF Health System Tracker
Are pharmaceuticals really more expensive in the U.S. compared to other countries?
One inconvenient fact: U.S. drug spending ranks below global peers—once you adjust for total healthcare spending. Despite the political rhetoric, U.S. drug spending is—and has been—in the middle of the pack as a share of total healthcare spending.
This chart tells a story similar to an IQVIA study of net retail and non-retail drug spending in 11 countires. IQVIA found that total drug spending accounted for 14% to 18% of total healthcare spending in most countries.
My social media post on this topic drew both kudos and complaints. But as I see it, we can't have sensible conversations about healthcare spending and public policy without accurate context and facts.
The same source also noted: "The U.S. spends twice as much as comparable countries do on health, driven mostly by higher payments to hospitals and physicians.” Wake me up when physicians and hospitals propose benchmarking their salaries and fees to other countries.
One inconvenient fact: U.S. drug spending ranks below global peers—once you adjust for total healthcare spending. Despite the political rhetoric, U.S. drug spending is—and has been—in the middle of the pack as a share of total healthcare spending.
[Click to Enlarge]
This chart tells a story similar to an IQVIA study of net retail and non-retail drug spending in 11 countires. IQVIA found that total drug spending accounted for 14% to 18% of total healthcare spending in most countries.
My social media post on this topic drew both kudos and complaints. But as I see it, we can't have sensible conversations about healthcare spending and public policy without accurate context and facts.
The same source also noted: "The U.S. spends twice as much as comparable countries do on health, driven mostly by higher payments to hospitals and physicians.” Wake me up when physicians and hospitals propose benchmarking their salaries and fees to other countries.
Choosing a Health Insurance Plan, Dr. Glaucomflecken
Dr. Glaucomflecken, the funniest physician on the internet, helps you choose a new insurance plan for 2025.
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