Pharmacy Benefits Uncut

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As we head into fall and the leaves on the trees transform into colourful hues of orange and red, and the kids get settled back into school, September often triggers a sense of renewal. And if you’re looking to overhaul your pharmacy benefits, there’s no better time than now.

So today I’m sharing four things you need to consider when developing a pharmacy benefits strategy that’s both financially sustainable and leads to improved health for your plan members.

1. Transparency

I’ve written before about how this word is overused in the healthcare space almost to the point of being debased, particularly as it relates to PBMs. But what about the transparency related to your own plan? Do you know how PBM rebates are affecting your drug prices or how they may be affecting (or distorting) other aspects of your plan? Do you know how your pharmacy dollars are being spent on things like prescription reimbursement, administrative charges, clinical service fees just to name a few? Perhaps most importantly do you know how your drug prices are determined and what factors affect them? Do you have access to your claims data and can you analyze it independently of your PBM? Are you part of the 37% of employers who don’t know how much of their PBM rebates are returned to them?

If you’re in the dark about answers to some or all of these questions, it’s time to shine some light on your pharmacy benefits plan. Of course, the complexity of the pharmacy benefits world, PBMs in particular, is a feature not a bug of the system, so you’ll likely never know exactly how each dollar of your pharmacy spend is allocated. But the more information you have, they better equipped you’ll be make sure you’re getting value for your money. Eliminating some of the opacity around your plan is a huge step towards achieving the goal of providing your members with access to the most effective drugs at the lowest possible cost.

2. Friction

No matter what changes you make to your plan, if your members are having trouble accessing and using their prescription medications correctly, it’ll lead to increased healthcare costs somewhere down the line. Barriers such as having to navigate a maze of formulary exclusions, prior authorization or step-therapy requirements, pharmacy network restrictions, or unexpected changes to drug prices often lead to suboptimal medication use which in turn can result in further deterioration of a member’s health and the need for additional care such as emergency room visits or hospitalizations which inevitably cost more for the plan.

Out-of-pocket costs and copayments present financial burdens for many plan members and can lead to not filling prescriptions or skipping doses to save money, again resulting in additional costs to the plan. Keep in mind that cost-containment solutions can have the unintended effect of creating friction for members that could contribute to members not using their medications as intended. Make member experience a key consideration when evaluation any changes to your plan and avoid solutions that introduce friction.

3. Optimization

Who’s your plan working for, you and your members or your PBM? Examine every aspect of your plan through this lens. If your PBM is promising greater aggregate rebates every year but your drug costs are still increasing by close to double digits, this strategy is probably designed to pad the PBM’s bottom line rather than ensure you’re paying fair drug prices. Ask how they make formulary listing decisions – do they have a Pharmacy and Therapeutics Committee that objectively evaluates evidence of a drug’s effectiveness and safety or are the effectively running a pay-to-play scheme with a rebate driven formulary that drives up drug prices? Are they imposing pharmacy network restrictions to steer members to pharmacies they’re affiliated with and unfairly marking up drug prices? Are they restricting your ability to access your claims data or restricting how this data can the analyzed? These are just a few of the questions you need to consider when evaluating whether your PBM is providing solutions that serve the interests of you and your members or protecting their own financial interests.

4. Control

Who’s in charge of your pharmacy benefits plan, you or your PBM? Do you have a say in how your drug prices are set, which drugs are included in your formulary, and which pharmacies are included in your network? Do you have the right to carve out certain services from your PBM such as specialty drugs, prior authorizations or clinical programs? Do you own your pharmacy data and does your PBM need your permission to share it with third parties? Are you able to terminate your PBM contract without unreasonable financial penalties designed to keep you tethered indefinitely?

If the answer to any of these questions is no, you’re likely hamstrung by your PBM contract and ceding control over important aspects of your pharmacy benefits plan. It’s time to assert your position as the purchaser in this relationship and get a better deal for you and your members. Of course, the foundation of taking control of your plan is improved contract terms, but it really involves an active, ongoing, systematic process to evaluate whether your plan is working for you and your members. Establish key performance indicators (e.g. reduction in drug spend, adherence, biosimilar penetration rate), measure whether they’re being met and if they’re not, take prompt corrective action.

Using these four principles will help guide your pharmacy benefits strategy and will put you on track to drive down your drug spend, enhance your members’ experience, and improve health outcomes.

That’s all for this week.

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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