‍

Navigating PBM Procurements, Biosimilars, and GLP-1s‍

When evaluating pharmacy benefit managers (PBMs), plan sponsors' benefits consultants often rely on spreadsheets that highlight unit costs and rebate guarantees. While these metrics look great on paper, they rarely tell the whole story of what the plan will actually spend by the end of the year. The true drivers of cost, and savings, often hide beneath the surface. It's critical to understand and value the "drug mix," which is driven by clinical oversight and utilization management and helps create predictability around drug spend.

In this episode of the Astonishing Healthcare podcast, host Justin Venneri sits down with Bridget Mulvenna (VP, National Business Development) and builds on Episode 83 - Your PBM vs. Your Bottom Line. Drawing on her years of experience as a former plan sponsor and pharmacy director, Bridget unpacks the reality of modern PBM contracts, breaks down why lower rebates can actually be a positive signal for plan sponsors, how the biosimilar pipeline is reshaping the market, and what to watch out for as GLP-1 medications expand their indications.

Whether you manage total rewards for a large employer or consult on pharmacy benefits, understanding the mechanics behind these trends is critical for maintaining financial stability without sacrificing member care.

Related Content

• 6 recommendations for PBM procurement and Rx benefits optimization
• AH102 - PBM Reform Update: Health Policy Changes Slowly, Until it Doesn't, with Lloyd Fiorini
• Health Benefits 101: The Importance of Clinical Programs
• AH093 - Health Benefits that Work for Everyone: Aligning Incentives & Focusing on Members’ Needs, with Susana Villegas Spillman

The Problem with Spreadsheet-Driven PBM Procurements

During a typical PBM procurement process, consultants and plan sponsors rely heavily on rate cards. These spreadsheets do an excellent job of comparing unit costs and projecting rebate returns. However, they consistently miss how a PBM manages the actual mix of drugs dispensed to members.

According to Bridget, drug mix is far more critical to your final drug spend than the unit cost of any single medication. Everyone can offer a competitive unit price based on wholesale acquisition cost (WAC) or average wholesale price (AWP). But if the PBM with the lowest rebates also delivers the lowest overall net drug cost, the spreadsheet might fail to evaluate them fairly.

By only looking at ingredients and rebates, plan sponsors miss the financial impact of prior authorization protocols, refill-too-soon guardrails, and step therapy programs.

Rethinking Prior Authorization Rates

A common misconception among human resources and total rewards leaders is that a low prior authorization approval rate means employees are not getting the medications they need. Bridget points out that this metric actually indicates something much more valuable for the plan.

"Lower prior authorization rates don't mean people aren't getting drugs," Bridget explains. "They mean people are getting the right drug the first time instead of getting the most expensive drug the first time. And that matters."

Not every patient needs a high-cost specialty medication as a first-line treatment if a $15 alternative works just as well. The key question plan sponsors should ask is how much money the PBM makes by approving a higher-cost drug. If the PBM profits off the price of the medication, their incentive to approve fewer expensive drugs drops significantly.

The Biosimilar Boom and the Reality of Lower Rebates

The shift toward biosimilars is fundamentally changing the financial modeling of pharmacy benefits. Blockbuster drugs like Humira and Stelara now face fierce competition from biologically similar, interchangeable alternatives.

With the FDA fast-tracking biosimilar approvals to help reduce drug prices, the market is signaling a clear shift toward a biosimilar-first approach. Bridget expects two more major biosimilars, referencing Prolia and Xolair, to hit the market soon. But capitalizing on these lower-cost alternatives requires a shift in how plan sponsors view rebates.

If a PBM pushes a high-WAC biosimilar, they are likely protecting their rebate stream. Moving to a low-WAC biosimilar eliminates much of that rebate value, but dramatically lowers the upfront cost of the drug.

"If you're not getting a low WAC biosimilar which has a little bit of rebate value to it, then you're more than likely overpaying for a drug that is roughly equivalent to the drugs that are available to you in the marketplace," Bridget notes.

The math is simple: as the ingredient cost goes down, the rebate goes down. However, the rebate as a percentage of the total ingredient cost remains steady, ultimately saving the plan sponsor significant money on their bottom line.

Managing the GLP-1 Wave and Expanding Indications

GLP-1 medications represent a massive financial challenge for plan sponsors. While these drugs effectively lower A1C levels for diabetic patients and facilitate weight loss, they are crushing health plan budgets.

As manufacturers like Novo Nordisk cut the list prices of their products, and Eli Lilly introduces direct-to-plan pricing models for drugs like Zepbound, transparency is increasing. But just like with biosimilars, a lower list price means a lower rebate.

The larger threat to plan budgets is not just the cost of the drugs, but the sheer number of conditions they might soon treat.

"Your biggest risk is additional indications," Bridget warns.

GLP-1s are currently being studied for addiction, polycystic ovary syndrome (PCOS), and pre- and post-menopause weight issues. Once these new indications gain approval, utilization will spread rapidly across the population, driving up costs even further.

Prepping for the Future of Pharmacy Benefits

The market dynamics that built the rebate-heavy PBM model are fracturing. The future of pharmacy benefits is largely generic and biosimilar. At Capital Rx, the generic dispensing rate sits around 87%. That means only 13% of the products adjudicated through the formulary account for the vast majority of plan spending.

Plan sponsors must focus their energy on that 13%. Implementing dispense-as-written (DAW) penalties, for example, helps plans give their members a financial reason to choose a generic or biosimilar over an expensive brand-name drug.

Ultimately, plan sponsors must adapt to a market where transparency and clinical oversight override traditional rebate guarantees. Organizations that embrace this shift now will secure a massive competitive advantage, offering better care for their members while protecting their bottom line.

‍

Interested in transitioning to an aligned and transparent pharmacy and health benefit partner? Click here to get in touch with our team!