Pharmacy Benefit Managers: Providing Lower Prescription Costs for State Medicaid Programs Dealing with COVID-19
It’s no secret that the COVID-19 virus’s resultant economic upheaval has left more than 30 million Americans newly unemployed, disrupting access for many to employer-based health insurance at the time they need it the most. According to a recent analysis by the Kaiser Family Foundation (KFF), some 27 million people have likely lost employer-sponsored health care coverage due to job loss between March 1 and May 2, 2020. The KFF estimates that about 12.7 million of those people could be eligible for Medicaid this year, which would place a “potential strain on state budgets and provider capacity.”
As a crucial safety net program, Medicaid must be both fiscally sustainable and available to states’ low-income populations who rely on it for health care coverage. With prescription drug coverage optional for the states, an influx in enrollment will strain state budgets, leading states to consider how best to fund Medicaid pharmacy benefits for this vulnerable population of patients, each of whom may need a number of prescription medications.
Given this growing challenge, pharmacy benefit managers (PBMs) have never been more essential. For both public programs and private insurance, PBMs are actively engaged in keeping prescription drug costs down, maintaining safe and secure patient access to medications, and making medications more affordable for individual patients.
PBMs manage prescription drug benefits for hundreds of millions of Americans, including those enrolled in Medicaid. In 2019, state Medicaid programs served a total of 58 million people. Based on that enrollment alone, over the next 10 years, PBMs will save $46 billion for Medicaid programs nationwide.
While all states provide prescription drug benefits to their Medicaid beneficiaries, they choose how to structure pharmacy benefits to best cover their populations. Whether a state decides to use a fee-for-service or managed care model in its Medicaid program, PBMs can lower their prescription drug costs. One of the most important PBM tools is drug mix management. PBMs incentivize and encourage the use of lower-cost generic and therapeutically equivalent branded drugs, leading to lower net costs in Medicaid programs. The state Medicaid programs with the lowest prescription drug costs have the highest generic dispensing rates. The more tools a state lets its PBMs use in Medicaid, the more savings it can glean, stretching already thin budgets.
To ensure that Medicaid beneficiaries have safe, affordable, and reliable access to their medication during the pandemic, state governments have thoughtfully provided regulatory flexibility for PBMs, health plans, pharmacies, and others in the drug supply chain. For example, some states have relaxed restrictions on signature requirements for home delivery of prescription drugs. In March, the number of prescriptions delivered directly to people’s homes, through mail-service pharmacy, increased by over 13% overall. Given the savings and accuracy that mail order pharmacy provides, states should continue to enable its use, even after the pandemic subsides.
During and after this pandemic, our priority should be enabling everyone to get, as cost-effectively as possible, the health care they need. PBMs are committed to their core mission of providing affordable access to prescription drugs. Helping fortify Medicaid budgets will be important to getting Americans to the other side of this public health crisis.