How Big 3 PBMs use MAC lists to overcharge self-insured businesses

The Big 3 PBMs maintain thousands of Maximum Allowable Cost (MAC) lists, which determine how much pharmacies are reimbursed for generic drugs. Because these lists are proprietary and vary across contracts, they allow PBMs to charge different clients different prices for the same medication. In many cases, the largest clients receive more favorable MAC pricing, while smaller clients including many self-insured employers pay significantly more for the same prescriptions.

That dynamic is important context for the announcement that Blue Cross Blue Shield of California is moving away from the Big 3 PBMs in order to get a fairer deal. If a health plan with 4.8 million managed member lives struggles to secure transparent and competitive MAC pricing from the Big 3, how can a typical self-insured business with a few hundred or a few thousand member lives expect to do the same?

One of the most important, and least understood drivers of prescription drug pricing is the Maximum Allowable Cost (MAC) list. The Big 3 PBMs maintain thousands of proprietary MAC lists that determine how much pharmacies are reimbursed for generic drugs. Because these lists vary across contracts and are rarely fully transparent, PBMs can effectively charge different clients different prices for the exact same medication. In practice, this often means that the largest clients receive more favorable MAC pricing while smaller organizations, including many self-insured businesses, end up paying significantly more.

Recent industry moves highlight just how challenging this system can be to navigate. For example, Blue Cross Blue Shield of California recently announced plans to move away from the Big 3 PBM model in search of a more transparent approach to pharmacy pricing. If a health plan managing roughly 4.8 million member lives struggles to secure fair and transparent pricing within the traditional PBM system, it raises an important question for employers: how can a typical self-insured business with a few hundred or a few thousand covered lives expect to negotiate better MAC pricing? Even large broker coalitions that promise improved pricing rarely have the same negotiating leverage as organizations of that scale, and some introduce their own conflicts of interest, a dynamic that has been highlighted in reporting by Bob Herman at STAT.

While this system may appear difficult for employers to navigate, there is an alternative path. Increasingly, organizations are moving toward unbundled pharmacy benefit models designed to improve transparency and access the lowest-cost drug sources available. In fact, many of the strategies now being explored by organizations like Blue Cross Blue Shield of California mirror approaches that transparent PBMs have implemented for years. For example, Blue Shield recently partnered with Mark Cuban Cost Plus Drug Company to access lower-cost generic medications and selected Amazon Pharmacy as its home delivery pharmacy partner. SmithRx has long integrated both organizations into its pharmacy ecosystem — working with Cost Plus Drug Company early on and offering Amazon Pharmacy services since its launch as PillPack. These partnerships are just two examples of programs available through SmithRx’s Connect 360 model, which helps employers identify the lowest-cost and most transparent pathways for prescription drugs.

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