By Robyn Tikia
Here’s the part of the PBM debate that bothers me…..Employers are increasingly being told, “You’re the fiduciary. You should have known.”
Known what?
- That the PBM was retaining revenue they didn’t realize existed?
- That rebates weren’t flowing entirely to the plan?
- That spread pricing was generating additional revenue?
- That specialty drug economics were producing enormous margins?
- That affiliated entities were sitting between the plan and the manufacturer?
- That the “transparent” PBM contract wasn’t actually transparent enough to independently verify the economics?
Because here’s the uncomfortable irony: Regulators are now alleging that some of these PBM business practices were so complex and opaque that they warranted significant regulatory scrutiny. Yet employers are increasingly being told they should have uncovered it all themselves.
Wait…what?
If the economics were difficult for sophisticated market participants to see through, why should the employer fiduciary be presumed to have understood them? And this is where I think the conversation needs to change…..
A PBM saying “we’re transparent” isn’t transparency. A contract saying “pass-through” doesn’t necessarily tell you where every dollar went. A rebate guarantee doesn’t tell you what happened to the rebates before the guarantee was calculated. And a quarterly report showing “savings” doesn’t tell you whether the plan actually received the best available net cost.
The fiduciary standard can’t simply be: “Trust your vendor.” It needs to be “Show me the money.” Show me:
- Every revenue stream
- Every rebate
- Every administrative fee
- Every spread
- Every affiliated entity
- The actual acquisition economics
- The contract language supporting the compensation
- The data necessary to independently audit it
Because if an employer is going to be held accountable for failing to monitor its PBM, shouldn’t the employer have the contractual rights and data necessary to actually monitor the PBM?
That’s the part I find fascinating….the industry spent decades building incredibly complicated PBM economics and now we’re telling employers they should have understood all of it.
Maybe the fiduciary question isn’t “Why didn’t the employer know?” Maybe it’s “Why wasn’t the employer allowed to know?” And I’d really like to hear from the PBMs, brokers, consultants, plan sponsors and ERISA attorneys on this one. Is “the PBM didn’t disclose it” becoming the next “the contract was too complicated to understand”?