Prime Advantage Blog

How GPOs Can Help Companies Save on Prescription Drug Prices

Mike McDonald on Jan 10, 2018 9:23:39 AM

It’s no secret that medication prices are a huge expense in a company’s overall healthcare plan offering. But what may be a secret is that one of the major reasons for these escalating costs are Pharmacy Benefit Managers (PBMs). PBMs are companies that are employed as intermediaries between health plans, manufacturers, and pharmacies.  Often with little to no medical training, PBMs determine what drugs are available within a given plan and which patients have access. In return they receive reimbursement, administrative fees, and rebates for their services from the parties involved. These added costs are often absorbed by the end-using patients, driving up the price of medications.

PBMs are frequently motivated by which drugs are going to be most profitable, instead of by what’s best for patients and their physicians’ preferred treatment plans. What allows this arrangement to continue is widespread lack of transparency within the industry. Without being able to see the flow of cash within the system, PBMs can abuse their power. GPOs are fighting back by offering healthcare plans that only use PBMs with “pass through pricing,” providing full transparency on prescriptions costs. This visibility into transactions between the manufactures, pharmacies, and PBMs, creates an environment where the best interest of patients and physicians is the top priority, rather than lining pockets with unnecessary fees.

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Topics: Healthcare

Mike McDonald

Posted by Mike McDonald

Mike is the Executive Vice President of Business Development for Prime Advantage, a Chicago based Group Purchasing Organization for mid-market manufacturers. Responsibilities include managing business development, marketing, and the GPO's Healthcare Cost Containment program. He’s been a featured speaker, published author, and recognized award winner within the supply chain community.

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