Pharmacy Benefits Uncut

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Most employers have a simple goal with their pharmacy benefits plan: provide access to effective medications at fair prices.

And PBMs have likely convinced you and other employers that they’re the ones best positioned to do this for you.

They tell you bigger rebates lead to lower drug costs.

They promise to help manage specialty drug spend.

They assure you their formulary listing decisions are based on value assessments.

But your pharmacy spend keeps increasing by double digits every year.

Many employers are just now starting to realize something important:

Relying on a traditional PBM to manage your pharmacy benefits isn’t a feasible strategy. It’s a recipe for unsustainable drug price increases that don’t bring any commensurate benefits.

But employers who take control of their pharmacy benefits plan can be wildly successful at achieving value for their drug spend. Heck, they’re often able decrease their drug spend AND improve health outcomes for their plan members.

Many employers are currently wrestling with exactly this issue, yet they’re not sure how to break away from the stranglehold of their PBM.

Limiting your PBM’s involvement in your pharmacy benefits plan may seem like a scary idea on the surface. But if you’re focused on achieving value for your drug spend, it’s probably the smartest move you can make.

So today I wanted to share eight rules that will help you break free from the tactics of your PBM, which are designed to benefit them financially instead of provide value for you and your plan members.

Let’s dive in.

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Rule 1: Define what success with your pharmacy benefits plan looks like

Before you attempt to revamp your pharmacy benefits plan, decide what success looks like for you and your plan members.

Are you attempting to lower your drug spend? Do you want to provide more access to clinical pharmacy services for your plan members? Do you want to address inequities in access to medications? How would you measure the success of your pharmacy benefits plan?

Your answers should guide every decision you make about your plan.

PBMs optimize for maximizing their profits, which means they make more money as your use of expensive drugs increases. You, however, can achieve financial sustainability and improved health outcomes for plan members. Establish your priorities and then start taking concrete steps to achieve them without relying on your PBM.

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Rule 2: Make sure your definition aligns with your plan members’ definition

You need to make your plan members full partners in any changes to your pharmacy benefits plan. If your goals and priorities don’t align with theirs, you’re unlikely to be successful.

The key to understanding your plan members’ perspective is to have a comprehensive engagement strategy. Too many employers implement changes to their pharmacy benefits plan only to realize they don’t address the needs of their plan members. That's a huge problem.

Start by opening up the lines of communication with your plan members. This approach builds trust and positions you as partner in their healthcare journey who’s acting in their best interests.

Once you do this, your plan members will become your biggest asset. They'll tell you exactly what their pain points are, help validate your strategy before you execute it, and give you feedback on what’s working and what’s not working once you implemented a new program. Plan member engagement is the foundation of a successful pharmacy benefits plan that's focused on meeting members’ needs rather than padding a PBM’s profits.

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Rule 3: Learn the basics

As I’ve written before, PBMs work on the basis of information asymmetry: they have access to information you don’t, and they use it to their advantage. Arm yourself with basic information about how the pharmacy benefits industry works. Learn about rebates, drug formularies, biosmilars and other aspects of your plan.

Knowledge is power (yes, I know it’s a trite saying) but it’s especially true in the pharmacy benefits world where some basic information can potentially save you and your plan members millions of dollars.

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Rule 4: Ask A LOT of questions

Once you’ve acquired this knowledge, use it. Ask your PBM lots of hard questions to try and keep them honest.

Ask why bigger rebates aren’t lowering your drug costs. Ask whether they have a biosimilars first strategy. Ask how they make formulary listing decisions. Ask whether steering your plan members to pharmacies they own increases their revenue at the expense of you and your plan members.

But don't limit your questions to your PBM. Ask your broker or consultant about whether they’re receiving incentive payments from a PBM. Ask other vendors you work with about their revenue sources and relationships with PBMs.

The answers to these questions will help you determine whether the financial incentives of your PBM and your other vendors are aligned with yours. If they’re not, it might be time to find some new partners to help manage your pharmacy benefits plan.

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Rule 5: Audit your pharmacy benefits data

​Make sure you, not your PBM, owns your pharmacy data. You should be able to access data on individual plan member claims and audit it independently of your PBM. This will allow you to establish key performance indicators and measure the success of your pharmacy benefits strategies.

Having access to your pharmacy data helps protects you and your plan members from the misaligned incentives baked into the traditional PBM business model. It also gives you leverage to ask hard questions of your PBM and to take your business elsewhere if their answers are unsatisfactory.

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Rule 6: Don’t put all your eggs in one basket

If you’re relying on your PBM to manage every aspect of your pharmacy benefits plan, you’re essentially allowing them to act as judge, jury, and executioner all rolled into one.

Many of the of the functions and services your PBM handles can (and probably should) be carved out to ensure appropriate oversight and address inherent PBM conflicts of interest.

You as the employer can carve out things like specialty drugs, management of your drug formulary, prior authorizations, just to name a few.

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Rule 7: Make incremental changes

Loosening the grip of your PBM on your pharmacy benefits plan is no small undertaking. Pharmacy benefits is one of the most complex areas of your healthcare benefits plan and big changes will take time.

Identify priorities for how you’d like to change your relationship with your PBM every quarter or every year and work to implement them one at time. Evaluate which strategies were successful at effecting your desired changes and which were not. Use this information to iterate your approach towards making your pharmacy benefits plan a pillar of financial sustainability and improved health outcomes for you and your plan members rather than an enterprise serving the financial interests of your PBM.

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Rule 8: Keep your options open

Although change in the pharmacy benefits world is a marathon rather than a sprint, it’s important to keep your future options open. There's nothing worse than being hamstrung by a PBM contract for two or three years. This significantly decreases your options, and as such, your ability to control your pharmacy benefits plan.

For example, you may not have any immediate plans to carve out management of your drug formulary, but requiring your PBM to inform you of all formulary changes gives you the information you need for long-term planning around your overall pharmacy benefits strategy.

Optionality is incredibly valuable when you're in the process of transforming your pharmacy benefits plan.

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The bottom line

There's no one-size-fits-all formula for optimizing your pharmacy benefits.

But the one thing that’s non-negotiable is control: you as the employer must oversee every aspect of your pharmacy benefits plan if it’s going to be financially sustainable. Traditional PBMs profit as your drug spend increases and they have every incentive to drive it higher.

Every moment they’re in charge of your pharmacy benefits plan they’re profiting financially at your and your plan members’ expense.

Use these 8 rules to put you, the employer, in the driver’s seat when it comes to your pharmacy benefits. They're designed to help you gain control, reduce risk, and make decisions focused on achieving value for your drug spend.

That's all for today.

See you in two weeks,

Nina

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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

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