There’s a lot of buzz in artificial intelligence (AI) communities about “black box” and “glass box” models. The heart of the debate centers around transparency. The question is whether it’s better to be able to see how AI systems arrive at their outcomes—or not. Does seeing an AI system’s inner workings create more trust in its data and recommendations?
A similar debate is going on within the PBM space. Instead of algorithm results, the question is whether we need more transparency around drug prices, rebates and discounts.
For quite some time, PBMs have enjoyed great success partnering with manufacturers in traditional rebate-based black box models. These models do provide plan sponsors with discounts they wouldn’t otherwise get. However, they also give scant visibility into benefit structures that typically have few incentives to reduce sponsors’ pharmacy spend.
Consequently, those trying to curb healthcare costs have amplified demands for visibility. This has given rise to more price transparency in the form of PBM pass-throughs. But is the glass box model any better? Whether the pricing box is opaque or transparent, it still encourages us to dispense larger volumes of higher-cost drugs with bigger rebates.
Here’s the real question: Why are we talking about boxes at all?
Healthcare is not a box. One of the biggest challenges we face is that we tend to equate healthcare with the retail industry. But patients are not products. Healthcare services are not arbitrage. We shouldn’t “shop” for pharmacy benefits the same way we shop for a T-shirt. Trying to manage trade-offs between cost and service is not the right focus for healthcare.
Real PBM value isn’t achieved by moving from a black box to a glass box. It’s achieved by getting rid of the box altogether. We must build a new industry model in which value is our focus, not volume and rebates. Value-based models created through alignment and accountability are the only way to truly move the needle on PBM quality and spend.
Accountability Delivers Real Value
To determine the best way to bend the pharmacy cost curve, plan sponsors should ask themselves some key questions:
- Are you OK knowing you’re overspending?
- Are you 100% certain your employees or members are always getting the most clinically appropriate medications, whether or not they deliver higher rebates?
- Would you be delighted for your own family to use the same pharmacy benefits purchased for your employees or members?
These are provocative questions, to be sure. But they highlight why accountability—not just transparency—is what’s needed to realize real PBM value.
Think about glass box PBM models for a moment. They’re a lot like taking a shopping trip to a big box warehouse retailer, where great discounts are clearly displayed. It’s all too easy to get so excited by the discounts that you end up buying things you don’t need and spending twice your budget. Sure, you can see how much you “saved” on each purchase. But you still blew your overall budget without any assurance your acquisitions will improve your life.
We simply can’t do that with pharmacy benefits. Clinical quality assurances are critical when the health and wellness of employees and members are at stake.
Doing right by them fundamentally includes an unwavering commitment to clinical excellence that can’t be addressed by discounts and rebates. However, if we prescribe the best drugs for their needs instead of those with higher rebate values, then we’ll arrive at the most appropriate utilization mix and lower gross spend over time.
This kind of accountability mindset cultivates both financial and healthcare value for PBMs, plan sponsors and members. Here’s how:
- Financial value comes from financial alignment. A PBM shouldn’t make any money until its clients save money. Such pay-for-performance models provide the incentive to achieve cost savings. Having to stand behind a financial guarantee motivates pay-for-performance PBMs to optimize pharmacy benefits, not just churn out more prescriptions.
- Healthcare value comes from aligning with members’ needs. The secret to delivering excellent care and lowering both short- and long-term costs is finding exactly the right medicine for each person, ensuring adherence and tracking its effectiveness. This “clinical-first” approach safeguards members’ health and wellness, which in turn establishes true savings and satisfaction.
Don’t get me wrong: I’m all for transparency as a general concept. But PBM visibility is not what plan sponsors are missing; what’s missing is value. Value comes from alignment, and alignment comes from pay-for-performance models.
So, try not to be distracted by the black box/glass box conversation. Neither is the answer for pharmacy benefits. Forget about boxes entirely, and focus instead on value.