Pharmacy Benefits Uncut

Read time: 4 min

​Read this newsletter online​

Almost every employer I speak with wants to fix their pharmacy benefits plan. They know drug costs simply can’t be increasing by 10% or more year-over-year without things eventually coming to a breaking point.

The problem is most employers quickly become overwhelmed when it comes to the thought of where to begin this gargantuan task. So they simply bury their heads in the sand and walk away, hoping it’ll somehow take care of itself even though they know that isn’t going to happen.

To help address this overwhelm, I’m sharing some critical questions you need to ask about four areas of your plan to put you on the road to getting value for every dollar of your drug spend.

Let’s dive in.

Your PBM Contract

The easiest way to hamstring your pharmacy benefits plan is by failing to optimize your PBM contract. It’s purposely designed to be confusing, unnecessarily complicated, and frustratingly opaque to give your PBM the upper hand. But here are three things you absolutely need to address to turn the tables and take control of your relationship with your PBM:

a. Make sure your PBM contract definitions are clear and reasonable. There are few universally agreed upon definitions in the pharmacy benefits world, allowing your PBM to use opaque contract language and broad definitions subject to various interpretations to obscure your ability to figure out exactly what’s going on with your pharmacy spend. Close this loophole by insisting on transparent, concrete definitions that give you the leverage you need to control your pharmacy benefits plan.

b. Demand ownership of all your data. Make sure your contract guarantees you own your data and have timely access to it in a format that allows you to audit it independently of your PBM. Also ensure that your PBM requires your permission before it’s able to use your data for its own purposes.

c. Ensure you can terminate your contract with reasonable notice and without financial penalties. Also make sure you’re able to take your data with you. Contract provisions that make termination difficult, if not close to impossible, is the lever many PBMs use to ensure you’re tethered to them for the long-term.

If you’re interested in a deeper dive on PBM contracts, check out Ginny Crisp’s recent newsletter that provides an excellent look at this issue

Your Formulary

Your formulary should be a tool to provide your plan members with access to the most effective medications at the lowest possible price, but the reality is that often your PBM uses it as a money printing machine to pad their bottom line. Here are the three things you need to address so your formulary is working for you and your members:

a. Ask how your PBM makes formulary listing decisions. Do they have a Pharmacy and Therapeutics Committee that objectively reviews evidence on a drug’s effectiveness and safety. If so, do you have access to these deliberations and justifications for the decisions that were made?

b. Make sure you understand the role rebates play in making formulary decisions. Determine whether your PBM is essentially operating a pay-to-play scheme in which they give preferred formulary status to drugs with the highest manufacturer rebates. If so, take steps to curtail this practice

c. Confirm whether you have the final say over which drugs are included in your formulary. Your PBM should be providing you with notice of changes it makes to your formulary and you should have veto power over these changes.

Your Specialty Spend

Specialty drugs make up the largest component of your drug spend. Very few of your plan members use them but they likely represent north of 50% of your total spend so taking steps to manage their utilization and cost is imperative. Here are three key things you need to address about your specialty spend:

a. Make sure your PBM has a biosimilars policy in place. But not any policy. You need one that focuses on transitioning to the lowest net cost biosimilar. Your plan could potentially save millions of dollars with this strategy so it’s definitely something worth demanding.

b. Determine whether your distribution channels are inflating prices. Many PBMs are vertically integrated and steer your members to pharmacies they own, allowing them to charge inflated prices for specialty drugs. Demand an end to these practices.

c. Ensure you have a comprehensive clinical management strategy in place that addresses prior authorizations as well as ongoing monitoring and evaluation of members on specialty medications to ensure they’re using their medications optimally and achieving the intended health benefits.

Your Member Experience

No changes to your pharmacy benefits plan will ever lead to optimization if they don’t address the needs of your members. You need to understand your members’ perspective and institute programs and services to meet their needs. Here are three non-negotiables when it comes your plan members:

a. Develop a strategy to meaningfully engage with them and understand their needs, priorities and challenges related to their medications.

b. Ensure your PBM integrates your members’ need into its solutions. Make sure your members have ready access to community pharmacies and medication management services.

c. Integrate equity as a key pillar of your pharmacy benefits strategy. Make sure decisions around issues like formulary listings and copays don’t negatively affect your members’ access to the medications they need.

The Bottom Line

Unless you make the effort to optimize your pharmacy benefits plan, the status quo will remain with double-digit increases to your drug spend every year. And PBMs aren’t going to change their game unless you demand it. It’s easy to convince yourself that change in this industry is impossible, but it’s not. Employers like you just need to step up and start demanding it.

That's all for this week.

See you in two weeks,

Nina

If you know someone who would find this newsletter useful please share it. Was this newsletter forwarded to you? Sign up here.

Pharmacy Benefits Uncut is produced by Healthcare Decision Making, a consultancy that helps small and medium sized employers optimize their pharmacy benefits plan. We offer a comprehensive range of services focused on three areas: PBM procurement, ongoing management of your pharmacy benefits plan, and self-policing and oversight of your pharmacy spend. To learn more about how Healthcare Decision Making can help you, email Nina Lathia at nina.lathia@healthcaredecisionmaking.com