Taking business to market regularly is one of the most effective cost maintenance strategies for your self-funded clients. It can be intimidating to send out an RFP and measure responses, but this business exercise can uncover the most competitive offer for your client. That’s not to say that you need to take your client’s entire self-funded plan to market; sometimes it makes sense to look at components of the benefit plan to determine where your client can save the most on plan costs.
One option is to explore bids for a pharmacy benefit manager (PBM) for your client’s prescription drug plan. How and why your client chooses their PBM is becoming increasingly important because a PBM’s activities are closely tied to pharmacy plan costs. With over 60 PBMs in operation, the marketplace has become highly competitive. Because of this competition, you want to be sure that your client gets the best deals in innovation, technology, and service. You and your client should check the market regularly. Many PBMs are developing programs that emphasize long-term health through wellness services, working not only to encourage the use of appropriate medications, but also to improve medication outcomes. This can be significant for clients whose employees suffer varying comorbidities or disease states. Picking a winning PBM can not only help your client lower plan costs, but it can also provide greater service, pharmacy access, and formulary options for participants, helping keep claims costs in balance. In order to help pick the right PBM for your client, here are five things to look for in a vendor:
One: Best Pricing
Evaluate how the PBM arrives at its pricing. As PBMs grow bigger and more powerful, there is a lot of opportunity for them to take advantage. For example, PBMs have been known to steer participants towards more expensive medications because it drives higher rebates. It is important to find a PBM that is willing to share its pricing structure and offer you some transparency. PBMs offer a variety of pricing structures — most commonly traditional or pass through. With a traditional pricing structure, the PBM provides a fixed guaranteed discount and shares a portion of the rebates with the client. The PBM’s revenue comes from pricing spreads and rebates. A spread is the difference between what the PBM charges the client and what it pays the pharmacies, and it can be a substantial. With a pass-through model, the client is billed exactly what the PBM pays the pharmacy, and the client receives 100% of the rebates. In this model, PBM revenue comes from administrative fees. Regardless of the pricing structure, you want a PBM that is aggressive with pricing and willing to demonstrate, at least in part, how and why it will save your client more than the competition will save them. It is important to evaluate all the components of the PBM’s pricing to determine how the PBM will reduce your client’s costs and manage the ongoing drug trend.
Some PBMs are more flexible in plan design, reporting, and the ad-hoc customization that’s needed to make your client’s plan run smoothly. While many PBMs limit personalization, some are receptive to their client’s needs and can make changes quickly and effectively. Not all PBMs are created equal; size and business model will determine the kind of service flexibility you will receive.
To get a good indicator of a PBM’s flexibility, evaluate how it responds to your client’s needs up front. Before approaching a PBM, list all of your client’s needs. Can the PBM accommodate these needs? For example, to make sure that participants are not inconvenienced during a plan change, your PBM should have a comprehensive network that includes major chains as well as independent pharmacies. Would not having a particular pharmacy affect the employee population? If so, is the PBM flexible enough to provide direct contracting services for any one pharmacy? Being able to meet your client’s needs quickly and effectively should be high on your priority list when evaluating PBMs.
You can’t manage what you can’t measure. Clear, consistent, and timely reporting is essential to managing your client’s pharmacy costs. How would you know if medications were being given to people who didn’t need them, if more expensive medications were being utilized when there were known and cheaper alternatives, whether claims payments were calculated incorrectly, or whether patients were abusing or not taking their medications? Without timely reporting, it’s impossible to assess your client’s pharmacy plan appropriately or determine the negative effects on plan costs. It’s important that your PBM’s reporting system works for you and your client. Your clients should be able to access data in real-time, and reports should be simple and easy to interpret.
It is important to find a PBM that you feel confident will look out for your client’s best interests and be a valuable business partner. Does the PBM have a service strategy to help manage your client’s pharmacy plan? Is the PBM staying on top of various marketplace trends? Specialty drugs comprise over half of the pipeline of new prescriptions coming to market. Your PBM should be negotiating the best pricing for those drugs and developing systems to manage those drugs effectively for your client. A quality PBM will monitor our client’s utilization reports regularly. It will have experienced account management and clinical advisors on staff to make appropriate recommendations. These representatives can answer questions and provide guidance to make sure that your client is maximizing the benefits of self-funding their pharmacy program.
Getting consistent service is a big issue because of the frequent mergers and acquisitions in the PBM marketplace. It’s important to look for a PBM that offers stability. Any acquisitions or changes in the infrastructure, claims processing system, mail order vendors, pharmacy networks, or formularies, will affect the PBM’s ability to provide continuous service. Unstable operations will result in disruption to participants, lack of valuable data, and possibly increased costs. If your client moved to the PBM at your recommendation, it could also strain your relationship. It’s important to ask about planned acquisitions or consolidations up front. While the PBM may not be forthcoming about an acquisition until it is made public, you can try to protect your client with performance guarantees. Performance guarantees allow your client to negotiate money back from the PBM for poor performance. It may also be a good idea to negotiate contract language that allows your client to terminate if the PBM is acquired after the decision to move forward is made.
Before sending out your request for proposals, make sure that you understand all of the nuances of your client’s pharmacy plan so that you can evaluate responses against known metrics. Most importantly, you will need to know where your client stands with pharmacy costs and how a change will affect their employees. Reviewing current claims data will give you and your client a better picture of overall expenses and plan utilization. It will also mitigate or prevent disruption.
It’s also important to know what features your client would like to keep or improve upon with their PBM. Ask what isn’t working and what could be better, as well as what works since those areas are often taken for granted. Lastly, PBMs often have contracts that can be difficult to understand and contract definitions that can be vague or undefined, which can lead to higher costs for your client. Involving an expert, such as a pharmacy benefit consultant, can help you assess terms and review your client’s current plan with other options in the market to make sure that your client gets the best possible deal.