Benefits Brief: Traditional vs. Fiduciary PBMs

August 14, 2019

Regardless of the size of an organization, health care coverage remains one of the largest expenditures for any employer, as medical and pharmaceutical costs continue to escalate nationwide. According to a report by the National Business Group on Health, the cost of providing health care and pharmacy benefits jumped 5% in 2019, for the sixth consecutive year, now costing employers an estimated $15,000 per employee.

As an insurance broker and full-service employee benefits consultant, Graham Company is committed to helping our clients control health care costs without sacrificing any of the benefits they offer to their employees. Given the current market, this means looking for innovative solutions to incorporate into employee benefits packages. One of those solutions is working with a pharmacy benefit manager (PBM) that leverages a fiduciary model. This model is disrupting traditional PBMs that have been highly criticized in recent news headlines.

Introduced many years ago, traditional PBMs intended to reduce drug costs covered by employers and increase access and affordability for consumers. However, contracts under this model are based on rebates between PBMs and pharmaceutical manufacturers, often benefiting a PBM’s margin rather than translating into cost-savings for the employer or the consumer.

Contracts under the fiduciary model, on the other hand, remove rebates and instead focus on the importance of full transparency and trust between all parties. Inherent in the meaning of a “fiduciary” or a trustee, PBMs using fiduciary language in contracts simultaneously consider the financial interests of clients and the best pharmaceutical or therapeutic solutions required to address varying clinical needs. For example, this may involve using a therapeutic equivalent to a brand name drug that is 50 times different in cost but still produces the same, if not better, clinical outcome.

We know the PBM market is very layered, which is why we immerse ourselves in the contracts, prescription spreadsheets, auditing reviews and formularies to ensure our clients have the full picture and that PBMs have considered all possible avenues for cost savings. By working with PBMs using the fiduciary model, we’re able to help our clients attack costs associated with health benefits and improve bottom lines, while also making sure any impact to their employees is taken into consideration. Overall, the health care industry is moving toward increased transparency and fiduciary PBMs are one way to achieve that.

Daniel R. Jordon
Employee Benefits Managing Director
The Graham Building
Philadelphia, PA, 19102
(215) 701-5289



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