What Every Employer Should Consider When Evaluating a PBM

Posted by Navitus Health Solutions on Feb 25, 2021 6:00:00 AM

Choosing a pharmacy benefit manager is never easy. Get informed for your next evaluation.

More than ever, employers are challenged with finding ways to cut costs while also providing a valuable health care benefit to their employees. And COVID-19 added another layer of complexity to the health care mix.

Net payer spending on medicines in the U.S. alone was more than $500 billion in 2019 (this includes out of pocket costs).1 It is not surprising that more than 60% of employers say that the drug and medical spend is unsustainable, according to a survey by the National Alliance of Healthcare Purchaser Coalitions.2

What Every Employer Should Consider When Evaluating a PBM

Finding the right pharmacy benefit manager (PBM) partner to help you strike the balance between controlling costs while improving outcomes for your members is crucial. Below are three key considerations to keep in mind as you evaluate PBMs.

#1 Make Sure the PBM is Aligned With Your Goals

What is the first thing you do when hiring an independent contractor for home improvement jobs? You identify what your goals and objectives are for your project. Then you look for companies and evaluate how well what they offer aligns with your goals so that you can come to a mutual agreement. The same is true when selecting a PBM. Clearly defining goals, but also confirming that the PBM aligns with them, is essential. Complete this step early in the process. It allows the PBM an opportunity to differentiate itself from the competition, so that you can make the best choice for your company.

#2 Obtain Clarification on Contract Language

No one wants to find out at the end of a home improvement project that they’ve missed details in the contract, right? This can change the scope of services delivered and impact your plan across the board. Although PBMs are similar, they do have differences in how they operate – commonly referred to as their business model. Some offer a traditional model approach, which is less transparent and has specific requirements for plan designs and contract details. Others offer a more flexible and fully transparent model, passing 100% of all discounts and rebates back to the plan sponsor. 3

When evaluating your PBM, make sure you fully understand all parts of the contract as there can be “hidden costs, missing data and varied definitions”. 3 Below are four contract areas to focus on3:

  • Formulary and Product Mix – Recommendations will differ based on the PBM business model

  • Rebate Caveats and Exclusions – Pay attention to the rebate guarantees

  • Administrative Fees – Look for additional costs to administer the plan

  • Per Member Per Month (PMPM) Costs – Metrics will differ based on the PBM business model
For a deeper dive into each business model and the key contract areas, take a look at our e-book, Key Insights Into How to Better Evaluate and Select a PBM.
#3 Get the Best Bang for Your Buck

With many home improvements, the cost can be a huge factor in the decision-making process, but it is not the only factor. PBMs offer core functions and services, but they also have noncore functions and services that can enhance your drug benefit plan. Although the price will be a significant consideration, the clinical expertise and additional service offerings are ways that PBMs can bring more value to the table. And that should be considered, too. Since you will sign a long-term contract in most cases, be sure that you are taking advantage of any additional services you will receive for the price you will invest in your drug benefit plan to better help you manage costs and improve member outcomes.

It is no easy task when selecting a PBM. However, taking these steps in the evaluation process can help you make the right decision. Whether you are working directly with a PBM or with a benefits consultant, ensure your goals are aligned, make sure you fully understand all aspects of the contract and maximize the value of your drug benefit.

Want to Learn More?
Listen to our latest podcast and hear GBS Benefits, a consulting firm, share tips on how they help clients evaluate and select a PBM.

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  1. Medicine Spending and Affordability in the United States. IQVIA Institute for Human Data Science. https://www.iqvia.com/en/insights/the-iqvia-institute/reports/medicine-spending-and-affordability-in-the-us. Published August 4, 2020. Accessed February 8, 2021.
  2. How employers can reduce prescription drug spending. Employee Benefit News. https://www.benefitnews.com/list/how-employers-can-reduce-prescription-drug-spending. Published January 14, 2020. Accessed February 8, 2021.
  3. Key Insights Into How to Better Evaluate and Select a PBM. Navitus Health Solutions. https://go.navitus.com/podcast-episode-3-thank-you-0. Published January 2020. Accessed February 8, 2021.

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