Pharmacy benefit managers (PBMs) including Express Scripts, CVS Health, and OptumRX are the subject of intense criticism by virtually everyone in medicine and politics. While the purpose of PBM’s group purchasing business model was intended to contribute to lower drug costs and premiums, many of their customers have not experienced these benefits. Instead, many patients are choosing not to take their medications or take less than the prescribed amount.
PBM’s perceived association with escalating drug prices has achieved something rare: disdain at both ends of the political spectrum. PBMs have made enemies of everyone — including the AMA, which has been active in the fight to expose PBM’s convoluted market involvement, as well as the Trump Administration which has come out in favor of eliminating rebate transactions between pharma and PBMs.
Interestingly, Big Pharma isn’t too happy about the role of PBMs either.
Drug manufacturers have sided with the federal government, stating that they support eliminating PBMs from the supply chain. Pharma argues that their payments to PBMs have done nothing to help rein in drug prices or stop PBM’s endorsement of expensive brand-name medicines.
Enter a possible market-based alternative. A subscription-based payment model coined the “Netflix model,” is entering the pharma scene with impressive potential. CMS has just approved the Netflix model for hepatitis C therapy in Louisiana.
In Australia, a similar effort for hep C has been in place since 2015, successfully using the Netflix model to pay and supply drugs to cure infected individuals.
That’s right; there’s another way to enjoy Netflix without movies.
Basically, the Netflix model also makes use of group purchasing but without a middle man. Instead, public and private payers enter into a global contract with a drug manufacturer to provide an unlimited amount of drug therapies at a fixed price for thousands of individuals, who can access the therapy as often as needed. The arrangement is akin to purchasing a Netflix subscription and accessing unlimited streaming over the duration of the purchasing agreement.
The goal is to reach more patients with less of an individual financial burden. In the United States, the initiative is just starting to gain headway. JAMA outlined what the payment approach needs to be successful.
First, a combination of payers and stakeholders form a coalition to pool funds for an unlimited supply of drugs over a set amount of time.
Second, the pharma company providing the drug or drugs would have to agree to contribute to outreach efforts for patients.
And third, the drug manufacturers would have to cooperate to not only establish a price for the bundle but also enhance competition for a contractual bid.
Is it possible that the Netflix model could be a market-based alternative to PBMs by bypassing their involvement in the drug supply chain altogether? If this model expands, it is conceivable that pharmacies, insurance companies, self-insured businesses, value-driven clinically integrated networks and even populations of patients could do business directly with drug manufacturers using the Netflix model instead of using a middleman.
The sizable subscription payment to manufacturers would be enough to ensure that pharma maintains the margins they need to stay in business while increasing price transparency. The model could be expanded to include a number of different therapies too, including HIV treatments, vaccines, and even insulin. The United Kingdom is also on board, believing that the Netflix model could push pharma to develop new antibiotics for antimicrobial resistance.
The Netflix model may be an alternative to PBMs, much like Netflix itself is a growing alternative to cable. It shows potential in lowering health care costs, could increase outcomes at the population level, and, like all good business models, could increase access while minimizing the role of the middleman.
PBMs won’t necessarily go away, but this is the kind of market-based alternative that, in the U.S., may make government involvement less necessary. If politicians, government, the AMA, Big Pharma and, most importantly, patients are looking for a drug financing alternative that has greater transparency and a greater chance of controlling costs, the Netflix model approach might be a step in the right direction. While not widely known, Netflix has a core company philosophy of “people over process.” This may be the approach needed for increasingly unaffordable pharmaceuticals: direct access using a people-friendly model over a middleman-driven process.
Keely McManamon is a graduate intern, Care Centered Collaborative at The Pennsylvania Medical Society.
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