Why Pass-Through PBMs Outshine the Traditional Model: A Comparative Analysis

Why Pass-Through PBMs Outshine the Traditional Model: A Comparative Analysis

Over the years, the traditional pharmacy benefit management (PBM) model has been the norm, but a newer approach known as the pass-through PBM model has been gaining notable traction. In this comprehensive comparative analysis, we will explore the key differences that exist between these two models, highlighting why the pass-through PBM model stands out with unparalleled distinction in terms of both cost savings and transparency. Additionally, we will emphasize the manifold benefits of the pass-through PBM model, such as the complete absence of hidden revenue streams and the eradication of spread-pricing practices. These features empower employers and plan sponsors to gain unprecedented clarity regarding how their financial resources are being judiciously allocated in the complex arena of healthcare. Furthermore, we will discuss the exemplary role played by MaxCare, a prominent proponent of the pass-through PBM model, in contributing to better healthcare outcomes and the creation of vibrant communities, with an unwavering focus on supporting local community pharmacies.

The Traditional PBM Model: A Brief Overview

In the traditional model, PBMs often generate revenue through various means, including spread-pricing and hidden revenue streams, as well as rebates obtained from pharmaceutical manufacturers. Regrettably, these revenue sources are not always fully disclosed to employers or plan sponsors, thereby resulting in a disconcerting lack of transparency within the cost structure.

Hidden Revenue Streams: The Veil of Opacity

One of the most profound drawbacks of the traditional PBM model is the pervasive existence of hidden revenue streams. Within this opaque framework, PBMs regularly negotiate rebates with pharmaceutical manufacturers and subsequently retain a significant portion of these rebates as their own revenue. While this revenue can often be substantial, it is seldom transparently shared with employers or plan sponsors. This pervasive lack of transparency poses a significant challenge in evaluating the true cost of medications and the actual value of the PBM’s indispensable services.

Spread-Pricing: The Underbelly of Cost Ambiguity

Another ubiquitous practice that prevails within the traditional PBM model is spread-pricing. This intricate mechanism involves the PBM charging the plan sponsor one price for a particular medication while simultaneously reimbursing the dispensing pharmacy at a considerably lower price. Many times the pharmacy ends up losing money, as the reimbursed amount is lower than the cost of the medication for the pharmacy. The divergence between these two prices, commonly referred to as the “spread,” subsequently evolves into an additional source of revenue for the PBM. This insidious practice can lead to grossly inflated costs for both plan sponsors and beneficiaries, further exacerbating the glaring lack of transparency inherent in the system. 

The Pass-Through PBM Model: A Paradigm Shift Towards Clarity

The term “pass-through model” for PBMs refers to the way in which these PBMs handle certain financial transactions, specifically the rebates and discounts they negotiate with pharmaceutical manufacturers.

In the traditional PBM model, PBMs often retain a significant portion of the rebates and discounts they secure from drug manufacturers as part of their revenue. This means that the savings generated from these rebates and discounts don’t always directly “pass through” to the employers or plan sponsors who are covering the cost of medications. Instead, some of these savings are kept by the PBM as additional revenue, which can create a lack of transparency and potentially result in higher costs for plan sponsors and patients.

In contrast, the pass-through PBM model operates on the principle that all negotiated rebates, discounts, and fees are transparently passed through to the employer or plan sponsor. 

Full Transparency: Illuminating the Path Forward

The term “pass-through” essentially means that the PBM is passing through all financial benefits, such as rebates and discounts, to the payer, rather than retaining some of those benefits as additional revenue for themselves. It’s a model designed to maximize transparency and cost savings for those involved in managing pharmacy benefits, thus empowering employers and plan sponsors with crystal-clear visibility into precisely how much they are investing in PBM services. This unparalleled transparency, in turn, equips organizations with the essential tool of precise financial planning and astute cost management.

No Hidden Revenue Streams: Unveiling the True Costs

Pass-through PBMs shatter the prevailing paradigm by categorically refraining from engaging in the disconcerting practice of retaining rebates garnered from pharmaceutical manufacturers. Instead, any rebates successfully negotiated are unreservedly passed on directly to the employer or plan sponsor. This salient characteristic ensures that all potential cost savings accrue directly to the benefit of the plan sponsor, rather than being surreptitiously funneled into the coffers of the PBM. The eradication of hidden revenue streams paves the way for an era of unprecedented financial transparency and accountability.

Cost-Effective Medications: A Win-Win Proposition

In the pass-through model, PBMs operate under a compelling incentive structure that necessitates the prioritization of cost-effective medications. Given that their revenue is inextricably linked to plan administration, they are driven by an inherent motivation to systematically curtail overall drug costs while steadfastly upholding the tenets of high-quality healthcare. This harmonious alignment of incentives stands as a resounding testament to the pass-through model’s capacity to deliver tangible benefits to both plan sponsors and beneficiaries alike. The result is a reduction in healthcare expenses without the slightest compromise on the quality of care, unlike the traditional model, where revenue is generated based on the cost of the medication.

MaxCare: A Champion of the Pass-Through PBM Model

One preeminent advocate and embodiment of the pass-through PBM model is MaxCare, an organization unwaveringly dedicated to delivering transparent, cost-effective, and socially responsible pharmacy benefit management services. MaxCare’s distinctiveness lies in its steadfast commitment to supporting local community pharmacies and elevating member engagement levels, culminating in marked improvements in health outcomes.

Supporting Local Communities: Nurturing the Fabric of Society

In stark contrast to the traditional PBM model, where it is regrettably commonplace for PBMs to own and operate specialty and mail-order pharmacies, MaxCare has chosen to chart a different course. Under the traditional model, employers and their members are often compelled to exclusively procure their medications from PBM-owned pharmacies. However, this practice, while beneficial to the PBM’s bottom line, can inadvertently harm local community pharmacies and the very patients they dutifully serve.

MaxCare stands as a paragon of a different approach—one that values and actively supports local community pharmacies. Recognizing the indispensable role these local establishments play in healthcare delivery, MaxCare has meticulously designed its operations to promote economic vitality within communities while simultaneously ensuring that patients retain unfettered access to personalized care from trusted local providers.

Enhanced Member Engagement: Fostering Better Health Outcomes

One of the most profound advantages of MaxCare’s approach is its unwavering commitment to fostering enhanced member engagement. Local community pharmacies, being deeply rooted within the communities they serve, are often more accessible and capable of providing highly personalized care and meticulous medication counseling. This heightened member engagement translates into improved adherence to medication regimens and subsequently culminates in demonstrably enhanced health outcomes for patients.

Conclusion: Choosing Transparency and Community

In the ever-evolving landscape of pharmacy benefit management, the pass-through PBM model has emerged as a beacon of transparency and cost savings. It eliminates hidden revenue streams and spread-pricing practices, allowing employers and plan sponsors to have a clear understanding of their healthcare costs. MaxCare, with its commitment to supporting local community pharmacies and promoting member engagement, exemplifies the positive impact of the pass-through PBM model.

By choosing transparency and community-focused approaches, we can not only lower healthcare costs but also strengthen the fabric of our local communities. MaxCare’s sole source of revenue based on plan administration incentivizes the utilization of the lowest cost, most effective medication, ultimately benefiting both plan sponsors and beneficiaries.

In a traditional model that often favors PBM-owned pharmacies, the pass-through PBM model, as championed by MaxCare, offers a refreshing alternative that values local pharmacies, pharmacists, and the communities they serve. It’s a model that aligns incentives with the goal of improving health outcomes, making it a compelling choice for those seeking a better way to manage pharmacy benefits.

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