Pharmacy Benefit Managers, or PBMs, are intermediary companies that administer and manage the pharmacy benefits (prescription drug plans) within the healthcare ecosystem. Pharmacy Benefit Managers work on behalf of Payors such as Medicare Part D Plans, Employer Sponsored Plans, Managed Medicaid Plans and Health Plans.
Without stringent oversight, pharmacy spend can rise uncontrollably, which is why PBMs have become a necessary stakeholder in healthcare. Operating behind the scenes, PBMs are tasked with controlling prescription drugs costs, which they can accomplish in a variety of ways.
In managing the pharmacy benefit plan, PBMs’ core responsibilities include:
These require coordination across many stakeholders and are often complex in nature.
There are several items to be considered when a PBM bears these responsibilities.
The marketplace has shifted dramatically in the past few years as more health insurers and health plans move their attention to challenging status quo and seek greater accountability, more transparency and superior performance from their PBM. It’s important to note that a one-size-fits-all approach is typically not in the best interest of the clients. Each plan has varying mix of demographics and aging populations, as well as risk-tolerance.
The types of contracts include:
PBM contracts can quickly become overwhelming and managing them carefully is no small task. It’s critical to the Plan’s performance to ensure the contract is explicit and does not include potentially damaging loopholes. Understanding the entire agreement is essential for the Plan’s protection. Often these contracts contain lengthy sections filled with nuances that dictate the type of arrangement the Plan and PBM are entering. Definitions are one key section that requires complete understanding and agreement. Sometimes vague, the definitions enable many levers that can result in unnecessary spend. It is essential to ensure definitions align in the Plan’s favor and are best described to protect the Plan.
Financial and performance guarantees are additional contractual focal points that require attention. Whether financial or performance based, clients need to A) understand exactly what the guarantees entail/cover, B) understand how exactly these will be measured and monitored and C) ensure the client has full control for auditability. This degree of oversight enables the PBM to assume more of the accountability and risk-sharing.
The healthcare industry is rapidly changing and much of this is driven by the pharmaceutical industry. As such, it’s imperative for Plan Sponsors to approach their PBM contract with the fluid nature of the industry in mind. Lengthy contract terms may limit the ability for Plans to renegotiate when changes in the market occur.
The PBM contract contains procurement or monitoring. Ideally, the contract also contains flexibility for optimization as the industry evolves over time.
Whether you are still within the walls of your current agreement or are in the marketplace for a new PBM, it’s important to understand the lifecycle of PBM contracting. Understanding that procurement of the contract is the just a starting point and not the finish line empowers the Plan to deliver better results to all stakeholders.
The complexity involved when evaluating an agreement with a Pharmacy Benefit Manager is no small task and there are many nuances that dictate real-life outcomes. One bulletproof method to improving value within your Pharmacy Benefits plan is understanding the strategies available, along with having a playbook to deploy during the different phases of the contract lifecycle.
ProspHire has the expertise to augment and support you to ensure all blind spots are covered when it comes to PBM contracting. Regardless of the stage in the PBM contract lifecycle, we will meet you where you are. Get support by filling out our form below.