Happy Spring! For my friends up North who’ve endured another cold winter, I know this is a welcome time of the year. For my friends down South, let’s enjoy the season before walking outside feels like inhaling damaged silk (h/t Pat Conroy).


For me, spring means allergies. My eyes fill with water like I’m watching a Brian’s Song marathon, and my nose runs like Forest Gump after he catches a kick-off.


I remember when I had insurance, especially if we switched insurance carriers the year before allergy season, I would go through the battle of whether the one allergy pill that was effective for my symptoms would be covered by my new plan. Invariably, the insurance company would subject me to ‘step-therapy’. The plan would only cover the drug that actually worked for me, only after I suffered through taking other drugs that were typically cheaper – the same ones my allergist and I already knew weren’t effective because we had tried them already.


Now, what, in the corporate practice of medicine, is step-therapy?


A step-therapy is a utilization management protocol. There are two versions of it:


  1. Clinical: For patient safety
  2. Financial: For appropriate allocation of resources


In the post opioid-epidemic world, we all can potentially agree that a physician-managed program that attempts to curb potent pharmaceutical drugs from being prescribed when less expensive, less potent versions are suitable is justifiable. My critique is not on the step-therapy protocol in and of itself, however when compared with the ulterior motives of the pharmaceutical industry as at large, is where the truly disturbing motivations come to light.


The pharmaceutical financing industry warrants at least a 20-part series on billing shenanigans and conflicts of interests with your friendly local pharmacist and patient. I will just be focusing on one, and that is the pharmaceutical rebate scheme.


Pharmacy Benefit Managers (PBMs) are the real-estate agent equivalent of the drug distribution channel. They earn income in a variety of ways, one of which is the rebate. One of the many ways they earn this rebate from the manufacturer is to show that they did not “disadvantage” a drug’s sale to the patient. Essentially they need to show that they greased the wheels enough to get the drug to market with the least friction as possible.


What does this have to do with step therapy? Although total revenue on generic drugs is less than you would see on a brand drug, guess where the biggest rebates are paid?


If you said high-cost brand name drugs…you’d be wrong.


The largest rebates are paid on generic drugs. And that, my friends, is what ties this all back to step therapy.


Whether you have allergies, high blood pressure, diabetes, or some other chronic condition, when your insurance company holds paying for the drug that actually works for you hostage until you try a less expensive one, they are likely doing it for their own financial purposes as much (and maybe more) than they are doing it for patient safety.


How can employers who sponsor a plan help their employees deal with this?


Employers can soften the blow to employees who are on an employer sponsored plans that might be adversely affected by step-therapy. The first thing they can do is educate. If you are going to offer a group plan, provide some sort of education to employees showing that sometimes paying cash can be less expensive than what they might pay using their insurance plan, but they can also fill a script as written, instead of having the insurance company step in.



I hope there comes a day when more employers will see the value in self-funding their benefits, at least minimally, with a health reimbursement arrangement to offset the impact to the employees of paying cash for scripts.


At the other end of the spectrum, if you are a self insured employer, design a plan that allows you to pick your own PBM. Work with your advisor to vet PBM partners. Ask the PBM all the ways they generate revenue from their accounts, and pay close attention to buzz words like rebates, purchase order discounts, and administrative fees.


A strategic PBM partner will not leverage the knowledge gap when it comes to prescription drug financing to increase their revenue. Rather, they will engage as a true partner, and advise employers on an appropriate step therapy program for the benefit of the members.


There are plenty of good PBM’s out there who have the plan sponsors’ and patients’ best interests at heart. The key is working with an advisor who will act on your behalf to find them and hold them accountable.