3 Things PBMs and Ice Cream Have in Common (rerun)

Posted by Navitus Health Solutions on 8/12/21 8:00 AM

Pharmacy Benefit Managers and ice cream aren't something you'd imagine are all that similar. Discover the three things we found they have in common. 

With more than 1,000 delicious flavors available, walking into an ice cream shop and selecting just one can feel like a daunting task. Take one of the simplest flavors ever created—Vanilla. With variations like vanilla bean, French vanilla, New York vanilla and homemade vanilla how would the everyday person know the difference between any of these?

The very same can be said of pharmacy benefit managers (PBMs). With so many different models figuring out which one you want can be difficult. To make things simple, let’s break down the three PBM financial models: traditional, hybrid and pass through.

Traditional – Offers little to no transparency with many undisclosed revenue sources (e.g. spread, rebates) in addition to, or exclusive of, administrative fees.

Hybrid – Falls somewhere in between traditional and pass-through models, disclosing some but not all revenue avenues. For example, spread may occur in certain channels such as mail or specialty pharmacy. For rebates the PBM may be willing to share a higher percentage of the revenue. But with limited transparency it’s hard to know how much the PBM keeps.

Pass Through – Provides 100% transparency with a single revenue source—a flat per member per month (PMPM) administrative fee that’s agreed to up front. Under this model 100% of all rebates and discounts are passed back directly to the plan sponsor. 

Ice Cream brands and shops come in all sizes—bigger, nationally recognized brands like Ben & Jerry’s and Häagen-Dazs and smaller regional or boutique brands you might not know much about. They may be small in size, but they also may be surprisingly good when it comes to quality and flavor.

If your plan is to skip the ice cream shop and go straight to the grocery store, the containers themselves come in different sizes, too. A gallon of ice cream may be priced much lower, but the quality and flavor choices may be less. Similar to a large traditional PBM, bigger doesn’t mean that it’s better. In this case, bigger might mean you end up eating too much and get a stomachache.

And last but not least…the toppings. Do you like to add your own, piling them on as high as you can, and leaving you to mix it all up yourself? Then you find out if you created a masterpiece or disaster. Or would you rather have the toppings already included in your ice cream, relieving you from all uncertainty?

A traditional PBM is similar to self-serve shops where you go in and grab a dish, fill it with your favorite flavor and then add all the toppings you would like. You go to checkout and find out that you just paid $8 for your ice cream, when you were thinking you’d only spend $4. In addition, if you are not happy with your choices and want to add something else, you are charged yet another fee.

A pass-through PBM is more like a traditional shop where you get all your topping choices for one flat fee that you are aware of up front. It says that one scoop is $5 and when you get up to the counter, the price is exactly as you thought. Just like the pass through, one fee covers everything you need for your plan.

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Maybe the last time you had ice cream you tried a new flavor and had bad experience, so this time you are going to go with the flavor you always get. It might not be exactly what you wanted, but you are familiar with it and it will do for now.

The same can be said for trying a new PBM. The last time you switched might have been an unpleasant experience. And now you are afraid to make the leap, even though you are not satisfied with just sticking with what you have.

In the end, don’t be afraid to try new flavors, a brand you’ve maybe never heard of or don’t know much about and pick all the toppings you want!

Interested in better understanding the ‘ins and outs’ of different PBM business models and how each can make an impact on your pharmacy spend? Download our free e-Book below.

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Topics: Insider

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