Pharmacy Benefits Uncut

Read time: 3 min

In the inaugural issue of this newsletter, I want to outline the one thing employers can focus on to optimize their pharmacy benefits plan: VALUE.

Anyone remotely connected to the healthcare space over the past few years will agree that the term value-based care has become ubiquitous, perhaps even over-used in some cases.

For those of you not familiar with its definition, value-based care refers to systematically considering both the cost and quality of any healthcare intervention. With pharmacy benefits, this means ensuring that every dollar of drug-spend leads to improved health outcomes for plan members.

Although this definition may seem simple, actually achieving value for your drug spend is more complicated. Many employers struggle with the drug-spend value proposition because they outsource the management of their pharmacy benefits plan to vendors such as a brokers, consultants, and pharmacy benefits managers (PBMs).

Taking control of your pharmacy benefits is key to achieving drug-spend value because it puts you in the driver’s seat. You have purview over decisions that are made for your plan members, rather than relying on vendors whose interests may not align with yours.

Let’s dive into exactly what I mean.

The Big Mistake

Many employers don’t have a comprehensive pharmacy benefits strategy that is focused on improving health outcomes for their plan members at the lowest possible cost. And so they’re forced to rely on different vendors to manage the many moving parts of their pharmacy benefits plans.

Many of these vendors, unfortunately, rely on misaligned incentives (e.g. PBM payments to pharmacy consultants and brokers, a focus on manufacturer rebates rather than lowest net drug prices, the exclusion of biosimilars from formularies) that can result in employers and plan members paying non-value-based prices for their drugs, or worse paying for drugs that have little to no health benefit over and above cheaper alternatives.

Without a set process for assessing a drug’s value, you're at the mercy of your vendors. Every reimbursement decision is different. You have no transparent, evidence-based approach to formulary management.

Before you know it, your drug spend has increased by 8% year-over-year. Maybe more. You’ll end up paying higher premiums for health insurance, increasing out-of-pocket costs for your plan members, and possibly restricting access to drugs based solely on cost considerations.

Drug prices keep going up, and like most employers, you have no idea how to even begin optimizing your pharmacy spend.

Your efforts to contain drug costs could lead to financial toxicity for your plan members (i.e. inability to afford increased out-of-pocket costs) which in turn could lead to clinical toxicity (i.e. deterioration in their health state).

A Better Approach: Value-Based Pharmacy Benefits Management

Here's how I recommend moving from a system based on misaligned incentives to a value-based drug formulary:

Develop a Strategic Plan to Manage your Pharmacy Benefits: do a deep dive into your processes for PBM procurement, drug formulary management, and ongoing evaluation of your pharmacy spend to identify challenges and areas for improvement

Choose your Vendors Carefully: work with vendors (broker, consultants, PBMs, clinical service providers) whose objectives align with your strategic plan and whose compensation (e.g. fees, referrals, commissions) doesn’t pose a conflict of interest

Identify Factors that Define Value: Focus on things like comparative effectiveness, safety, cost-effectiveness, health equity and plan member preferences.

Standardize Your Assessment: Develop a standard, repeatable process for assessing the value of individual drugs and clinical pharmacy services offered to your plan members

Review the Evidence: Use your criteria from above to determine the value of drugs you’re considering listing on your formulary and clinical services you’re considering offering to plan members

Make an evidence-based Decision: Determine which drugs and services you’ll provide access to, justifying your decisions with the evidence.

Analyze your Data: Make sure you are the owner of your data and that you have the right to analyze this data independently to self-police your pharmacy benefits plan and nip any wasteful spending in the bud.

Rinse and Repeat: Plan to review any new evidence that emerges after you’ve made your initial decisions.

This approach will streamline your pharmacy benefits plan and ensure that you get value for your drug spend.

It’s much more than simply changing PBMs or addressing a few pain points related to your pharmacy spend – it’s a fundamental shift in how you manage your pharmacy benefits to ensure you, the employer, is in the driver’s seat, and your plan members have access to the drugs that improve their health at fair prices.

And if you can get it right, you’ll have a sustainable drug plan that provides value for you and your plan members

Thanks for reading.

See you again in two weeks,

Nina