10 Questions You Should be Asking About Your Rx Benefits Plan: Part 3

Posted by Navitus Health Solutions on Jan 16, 2020 7:00:00 AM

In case you missed it, during the first two weeks of this three-part blog series we discussed how PBM models, pricing strategies and contract definitions can impact your plan spend. 

Check out the first two parts of this blog series here:

In this final installment, we’ll examine a few aspects of channel management, utilization management and the most important metric you should know when evaluating PBMs.

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Consider these questions when assessing your PBM relationship:

DOES YOUR PBM USE A SINGLE MAC LIST OR MULTIPLE MAC LISTS?

A Maximum Allowable Cost (MAC) list is the maximum amount that you will pay for a drug. This typically applies to generic drugs, since they are manufactured and distributed by multiple companies. MAC lists are updated regularly and may change with market conditions or repricing.

Traditional PBMs manage to a number or guarantee as stated in the contract, and retain any upside performance. It might be using multiple MAC lists, which can be changed at the PBM’s sole discretion. Your PBM should be using the same MAC list for all pharmacy channels, including retail, mail and specialty.

The example below demonstrates how a PBM with multiple MAC lists can pocket a significant spread throughout the contract.

Per Unit/Pill Maximum Allowable Cost (MAC) Billed to the Client

MAC List Example

WHAT IS YOUR PBM'S AVERAGE PA APPROVAL/DENIAL RATE?

Prior Authorization (PA) is the most frequently used utilization management tool, and is meant to ensure the prescribed medication is appropriate according to evidence-based clinical guidelines and is the most cost effective.

Currently, no industry standards exist for best-in-class PA criteria, and PA acceptance rates vary among PBMs. This can have a significant impact on your pharmacy benefit plan costs, and makes it challenging to compare between PBMs.

However, it’s helpful to consider this:
If your formulary is rebate-focused, then your PBM’s goal may be to approve as many claims as possible to get as many rebates as possible. However, if you choose a lowest-net-cost formulary strategy, then your PBM’s PA program will focus on recommending lower-cost alternative options that are based on clinical guidelines. In general, higher approval rates may lead to higher overall drug spend.

WHAT IS YOUR ALL-IN NET PAID PMPM?

Big rebates, deep discounts and transparent pricing don’t guarantee the lowest price. All PBMs negotiate discounts with pharmacies and rebates with pharmaceutical manufacturers; however, it is ultimately your all-in per member per month (PMPM) cost that matters.

PMPM measures spend vs. trend, which is a more accurate depiction of the true costs. The PMPM metric is comprised of the total cost, net of rebates, including both plan and member paid amounts (not including the admin fee).

The industry average in 2018 was $88.97 PMPM. How does your PMPM compare?

You have a right to know where your money is going. Don’t pay more than you should.

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.

Want to learn more? Check out our e-book, 3 Ways to Improve Your Rx Benefit Plan Performance to gain additional insight into the key areas you can fine tune to improve benefit plan performance and increase savings. 

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