Pass-Through vs Traditional PBMs
April 18, 2022
Pass-Through versus Traditional PBMs what's the Difference?
There are two types of pricing models available to employers: pass-through and traditional.
A pass-through/transparent pricing model is where the PBM pays the same pricing discounts and dispensing fees to the pharmacy and the plan sponsor for prescription drugs. PBMs typically generate revenue through a per prescription or per member administration fee.
The traditional (spread) pricing model is where the PBM charges a plan sponsor a contracted price with specified discounts and dispensing fees for prescription claims, while paying the pharmacy a different price. The difference between the amount billed to the plan sponsor and paid to the pharmacy is known as a 'spread' and is retained by the PBM as revenue (instead of charging an administrative fee).
The primary differences between the two are:
- Pricing: For Pass-Through/Transparent pricing models, the PBM revenue is based solely on the administrative fee; 100% of all pharma-generated revenue passes to the client. For Traditional pricing models, the PBM revenue is based on hidden fees typically not shared with the client; only some of the pharma-generated revenue is shared with the client and in some cases none of the revenue is shared.
Data Sharing: For Pass-Through/Transparent models, client have access to 100% of their data down to the claim for better monitoring. For Traditional models, clients have access to limited data, typically sample data sets for auditing and reporting.
- Preferred Drug Lists (Formulary) – A list of prescription drugs covered by a prescription drug plan or another insurance plan that offers prescription drug benefits. The preferred drug list (PDL) for a health plan will dictate which prescription drugs will be covered. PDLs should be crafted carefully to optimize patient care with drug costs, rebate structures and access.
- Contracts: Pass-Through models offer models offer flexible contracts to align with plan goals, whereas, Traditional models offer rigid contracts and less flexible plan designs.
For most plan sponsors, one model may have advantages over the other depending on their objectives. The CBC team works closely with plan sponsors to understand the needs of the plan, evaluate market dynamics and install a PBM that best serves the plan and its members.
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