Ask these 8 questions of your pharmacy benefit manager

Managing and containing pharmacy drug costs is complex. As the industry evolves and parties demand more transparency into a traditionally obscure system, having a trusted pharmacy benefit manager (PBM) can give you confidence that your investment is being managed properly. Evaluate your existing PBM partnership by asking these eight questions.

1. Is your pricing arrangement truly transparent?

A pass-through pricing model is ideal because it aligns the interest of the PBM with your interest, however pass-through doesn’t necessarily mean transparent. In fact, some traditional pricing models are more transparent than pass through if all revenue streams are disclosed. Many PBMs will generate revenue directly or indirectly from your claims and you have the right to understand where and how much the PBM is making through the administration of your program.

2. Are our contract terms, definitions and guarantees transparent?

Of equal importance to the pricing structure are the pricing terms.  Complex formulas to determine the definition of a generic drug should be eliminated.  The determination of a generic drug should come from an outside source such as Medispan. Guarantees on a pass-through model should be minimum guarantees.  Finally, a guarantee should only be calculated based on claims processed at the contracted rate.

3. Are you passing back all revenues received from manufacturers? If not, how much revenue on a per claim basis are you receiving in addition to our admin fee?

It’s important to know how each party will be compensated. Demand transparency beyond a pass-through arrangement by understanding revenue breakdowns over the entire life of the contract.

4. Will we have access to independent, clinically-focused prior authorization?

PBM ownership of specialty or mail-order pharmacies can create a significant conflict of interest. If your PBM vendor owns a pharmacy that will benefit financially from filling a medication, they should not be in the position to determine who receives the medication. If this is not possible, have your PBM supply you with a monthly approval and denial report that shows activity for medications requiring prior authorization.

Related resource: How to Evaluate your Pharmacy Benefit Management Pricing Arrangement 

5. How will your utilization programs increase use of generic medications?

Distinguish formulary management that promotes brand medications from generic incentive programs.  For example, step therapy should never steer towards more expensive brand-name medications. Only implement utilization programs that promote cost-effective generics.

6. Are contracts based on a discount of AWP or acquisition based pricing for specialty claims?

Contracts based on a discount off AWP typically result in huge revenues for the PBM that only increase as specialty drug costs rise. Seek acquisition based pricing for specialty claims during your vendor evaluation process.

7. Can we add a 90-day retail maintenance network in place of mail order?

Many mail order pharmacies claim large discounts and better adherence rates. In reality, the discounts are negated by misaligned copays and auto-refill programs contribute to stockpiling and filling unnecessary orders. A 90-day retail maintenance network eliminates these concerns and maintains the critical pharmacist/patient relationship.

8. How will you educate our employees on highest-value pharmacies?

With true transparent pricing, costs to your plan and your employees can vary from pharmacy to pharmacy, it’s important to educate employees on highest-value options. Grocery and discount stores like Walmart and Costco are generally less expensive than the big chain drug stores.

Aligning with a trusted PBM partner is critical to successfully managing your pharmacy costs. For more best practices for employers, view more recent insights or contact our team directly.