Key Differences Between Fiduciary and Traditional Pharmacy Benefit Managers

by Nick Castellano, Castle Benefits Consulting Group

Pharmacy Benefit Managers (PBM) are authorized to manage the benefit on their own behalf, with a wide range of restrictions and constraints that serve the PBMs interest, often at the client’s expense. On the other hand, a Fiduciary PBM manages the benefit without that conflict of interest, and with better transparency – looking out for the best interest of the client and plan participants only. 

Some of the advantages of working with a Fiduciary PBM include having no direct pharmacy ownership (mail, specialty or otherwise) since that introduces conflict of interest. With specialty prescriptions accounting for upwards of 50% of total pharmacy benefit spend for many employers, there is comfort in knowing that the PBM is not incentivized to dispense high-cost medications to drive the PBM bottom line. Unfortunately, the largest source of PBM profits today comes from dispensing specialty medications.

Also, a Fiduciary PBM does not use the practice of “spread pricing,” in which the amount paid to the pharmacy is less than the amount charged to the client by the PBM. Spread pricing drives up cost to plan sponsors in a non-transparent, untrackable way which can add to the cost of each prescription on average. 

A Fiduciary is required to pass through all manufacturer rebates to the client and retains no funds received from drug manufacturers, because that would also introduce a conflict of interest.

The sole source of compensation for a Fiduciary PBM is administrative fees billed with full transparency on an invoice, free of hidden revenue or margins.

Without traditional PBM conflicts of interest, a Fiduciary PBM is free to focus on clinical management and sourcing of needed medications at the lowest available cost. Two of the most important functions of a PBM, which unfortunately is often lost in the traditional PBM environment.

I’m looking forward to meeting you at Elevate: The 2022 ANCOR Annual Conference in Miami in a couple of weeks. We will be at Table #20 in the Overture Foyer and would love to take a few minutes to talk about creative ways to save you money as well as your employees on the current benefit plans you offer.

Nicholas Castellano is President & CEO of Castle Benefits Consulting Group. Contact castlebenefitsconsultinggroup.com for more.