Welcome to part two of our blog series 10 Questions You Should be Asking About Your Rx Benefits Plan!
If you missed part one in last week’s blog, be sure to check it out here.
Last week we discussed the various PBM models and how pricing strategies can impact your plan spend. Now, let’s dig a little deeper into PBM contracts and look at definitions, rebate caveats and PBM revenue streams.
Plan sponsors should consider the following aspects of your PBM contract:
HOW ARE BRANDS AND GENERICS DEFINED IN YOUR PBM CONTRACT, AND ARE THESE DEFINITIONS CONSISTENT THROUGHOUT THE CONTRACT?
Review your contract for any changes in language regarding how drugs are defined or bucketed for guarantee purposes. Contract loopholes enable the PBM to shift commonly used generic drugs into the PBM’s calculation of its brand drug contract guarantees. This makes it easy to satisfy the guarantees and allows for PBMs to generate hidden revenue. It can also inflate the perceived cost savings if not applied to the appropriate claim set, for both network costs and rebates paid.
ARE THERE REBATE CAVEATS, AND HOW DOES THIS IMPACT THE REBATE VALUE YOU RECEIVE?Caveats can create optics that make the rebate appear higher on a spreadsheet than what you ultimately receive. Look for any rebate guarantee contingencies, including, but not limited to:
- Tiered design
- Minimum copay
- Minimum coinsurance
- Required step therapy programs
- Highly exclusionary formulary
- Retail 30 based upon a 1-83 day supply
- Retail 90 based upon a 84-90 day supply
ARE YOU RECEIVING 100% OF ALL THE REVENUE YOUR PBM RECEIVES FROM PHARMA?
Ask for number of brand claims, total dollars by channel and average days’ supply. Find out if any rebate aggregators or rebate intermediaries are involved. Make sure any improvement to rebate contracts during your contract term are immediately passed back to you.
PBMs may receive pharma revenues in various forms, including:
- Formulary rebates
- Administrative fees
- Market share fees
- Health management fees
- Data sales fees
- Educational fees
- Purchase discounts
WHAT IS INCLUDED IN YOUR ADMINISTRATIVE FEE?
A low administrative fee may look good on the bottom line, but what are you giving up that you may be unaware of? Administrative fees should not be tied to claims activity, including denied and reversed claims, as this practice often results in encouraging increased claims activity, which leads to a higher drug spend. Instead, the admin fee should be based on your total membership.
Learn more about PBM contract types, definitions and pricing practices in our ebook, 7 Things You Need to Know About Pharmacy Benefit Management (PBM) Models.
Be on the lookout for the final installment of this three-part blog series next week!