Myth 1: “Prescription Benefits Must Be Bundled With Your Medical Carrier”
While it’s easy to have the health insurance provider to manage all health-related benefits, employers can carve out their pharmacy benefits. This means they contract directly with a pharmacy benefit manager (PBM) to administer a separate pharmacy benefits program (rather than using the health insurance’s preferred PBM). Employers with self-insured plans are most likely to adopt this strategy.
Why, you might ask? By carving out pharmacy benefits, employers can better control costs and manage those carved-out benefits.
“The pharmacy benefit is the most complex health benefit provided to employees. The best way to manage this benefit is through a standalone pharmacy contract,” says Alysha Fluno, Truveris’ Chief Pharmacy Officer. “When pharmacy benefits are carved in with the medical provider, there may be only two or three pages of pharmacy financial detail in the overall contract. Unfortunately, very key elements like definitions around drugs and rebates, audit rights, market check provisions, and clarity into how the PBM makes money are lacking. This additional level of detail is integral to keeping the pharmacy contract market competitive and up to date.”
“When you have a carved-out pharmacy benefit, many contracts end up being 50-plus pages long. While the length of the contract may seem overwhelming, the additional detail provides clarity into how the entire benefit will work. There is little ambiguity on how the claims will adjudicate,” she adds.
By offering your clients the option to carve out pharmacy benefits, you give them the opportunity to:
- Plan design options and clinical programs that can help reduce costs
- Benefit from increased transparency in the PBM contract language that allows for:
- Access to pharmacy claims data
- Audit rights
- Market check provisions to ensure rates stay competitive
- Service performance guarantees
- Leverage implementation credits
- Earn an annual administration allowance
Myth 2: “PBMs look out for their own interests rather than my plan members' interests.”
The truth is, PBMs do a lot of good for employers through two main objectives:
- Help employers reduce drug spend
- PBMs negotiate pricing with a large network of retail or mail pharmacies to offer members and employers greater access to medications at competitive pricing.
- PBMs also offer extensive clinical programs, including step therapy and prior authorizations to help ensure proper medication usage, safety precautions and savings opportunities.
- PBMs also provide advice and recommendations on different plan designs, clinical programs and more.
- PBMs provide reporting that can shed light into the drivers of prescription drug trend.
- Increase access to medication
- PBMs negotiate directly with drug manufacturers or wholesalers for discounts they can pass on to clients.
- PBMs have established a large network of retail or mail pharmacies and can offer patients and employers better access to medications across multiple retail chains.
Furthermore, PBMs can negotiate with pharmaceutical companies to secure rebates for certain drugs. While the rebates are paid to the PBM, it may pass along some or all of the rebate to your client, depending on their contract with the PBM.
Myth 3: “PBM negotiation is a one-way street.”
The fact is, brokers and employers should negotiate with PBMs — and the request for proposal (RFP) process is the best time to do so. Drug benefit advisors say there are two elements to focus on when negotiating with PBMs:
- Transparent contract terms
This should include clearly defined wording within PBM contracts. The 2016 Pharmacy Benefit Management Institute’s Customer Satisfaction Report showed that plan sponsors are more satisfied with transparent PBMs. Armed with a more complete understanding of pharmaceutical spending, employers can educate employees on how to obtain the best deal on their prescriptions.
- Models that discourage “spread” pricing
A spread is the difference between what a plan is billed and the amount the pharmacy is reimbursed for the same prescription; the PBM retains the difference.
In addition, there are a few other things to remember:
- Don’t be afraid to ask for better pricing. The employer is the customer, and it isn’t obligated to use that PBM until the contract is signed.
- You’re not limited to just one PBM when negotiating. If you’re not happy about how the process is going, reach out to others — including smaller, up-and-coming PBMs.
- Avoid PBM contracts in excess of three-years to keep the employer from being locked into prices when pricing patterns change.
Myth 4: “Managing relationships with a PBM is difficult, complex, and expensive.”
While managing pharmacy benefits may seem overwhelming, there are pharmacy benefit experts and technology solutions that manage PBM relationships on behalf of health insurance brokers and employee benefits teams. These type of strategic partners can do the heavy-lifting of negotiating and monitoring PBM performance, putting it all in context and bringing transparency to the complex prescription drug ecosystem.
When it comes to pharmacy benefits, there are a lot of false “truths” out there. Understanding the realities behind these myths can give you and your clients more power to control the costs of pharmacy benefits.