.png)
Rebate aggregators have been around forever, but now they are being replaced by GPOs. Why and what exactly is the difference between a Rebate Aggregator and a Rebate GPO?” In 2019, Express Scripts launched Ascent Health Solutions. At that time, they called the entity a Group Purchasing Organization. That was the first time I ever heard the term GPO used when referring to a pharmacy benefit rebate. Prior to that, the entities that negotiated with manufacturers called themselves Rebate Aggregators.
I asked a friend of mine what the difference between an aggregator and a GPO is? He said it is “Semantics”. Semantics, huh? Well, if you look at the name, GPO stands for Group Purchasing Organization. Healthcare Supply Chain Association defines a GPO as an “entity that helps healthcare providers — such as hospitals, nursing homes and home health agencies — realize savings and efficiencies by aggregating purchasing volume and using that leverage to negotiate discounts with manufacturers, distributors and other vendors.” In this situation, the healthcare entity is buying product through the GPO, not directly from the manufacturer. In the case of a Rebate GPO, no product is transferred between the manufacturer, GPO and PBM. The pharmacy is buying the product from their GPOs, like McKesson or Cardinal, and selling the product to the patient. The Rebate GPO is simply a contracting entity. So why did the PBMs start calling themselves a GPO? To better understand this question, I thought we should dig a bit more into the rebate aggregation marketplace.
According to Drug Channels, the Big 3 PBMs (CVS, Express Scripts and Optum) processed 80% of all prescription claims in 2022. Their dominance in the marketplace is now expanded with the creation of Rebate GPOs. The Big 3 PBMs own the largest Rebate GPOs. Smaller PBMs contract with these Rebate GPOs so that their financials appear to be competitive in the marketplace. Almost no PBM contracts directly with drug manufacturers for the entirety of their formulary anymore. Rebate GPOs have the ability to dictate what drugs are covered on the formulary, what drugs are preferred and what types of utilization management edits can be applied to medications. Therefore, the Big 3 PBMs now really control 100% of the pharmacy benefit marketspace by owning these Rebate GPOs.
The other thing I found curious is these entities are typically offshore. Express Scripts’ Ascent operates out of Switzerland, and Optum’s Emisar operates out of Ireland. The exception is CVS’ Zinc. Zinc is a US based company. Why would these organizations operate out of a foreign country when the services they provide are only for US based companies? Two reasons: taxes and regulations. Switzerland and Ireland offer companies lower corporate taxes. Also, as the US government evaluates regulating PBMs, there is a question if those rules can apply to international companies.
Whether these entities are called GPOs or Aggregators, one important thing doesn’t change. These entities were established by the Big 3 PBMs to retain the revenue they were making from rebate retention. When PBM contracts with the GPO/Aggregator, they can claim they are passing through 100% of the rebates that the PBM receives, but they can’t claim that they are passing through 100% of the renumeration that was received from the manufacturers entirely. Their separate entity is retaining a “fee” that is not being passed along to the employer. As Greg Baker, CEO of the PBM AffirmedRx told me, “No PBM can claim to be transparent as long as they work with a GPO.” That is why AffirmedRx is going back to the old way of working with manufacturers, negotiating directly with them. Their rebates may not be as great, but the portion that the client receives will probably be greater.
To answer my original question, “what is the difference between an aggregator and a GPO”, my friend is correct, it is semantics. What is important is how these organizations affect the formulary decisions PBMs make. Are they driven to prefer a higher cost drug because their GPO will receive a larger administration fee, or are they looking for the lowest net cost for you and your members?
When you ask your PBM if they are passing through 100% of the rebates, it is important to understand is that 100% of the rebates THEY received or 100% of the rebates associated with your claims. Let’s expect more from our PBMs. Let’s demand greater transparency in what is actually happening with these GPO agreements and the impact it has on formulary decisions.
