Pharmacy Benefits Uncut

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For most employers, few things are harder than managing their pharmacy benefits spend.

There are, it seems, millions of moving parts in the employer-sponsored pharmacy benefits world: PBM procurement, rebate strategy, specialty carve-out, drug formulary management, biosimilar-first strategies, just to name a few.

The challenge is navigating these complexities to achieve value for your drug spend, that is making sure every dollar you spend on pharmacy benefits leads to improvements in health for your plan members.

You’ll optimize your pharmacy benefits plan when you nail two parts of an important equation — providing access to the right mix of drugs for your plan members AND paying fair prices for these drugs. Once you find this sweet spot, you’ve achieved value for your drug spend. Simple but not easy.

The Pharmacy Benefits Reality

With so many aspects to address with your pharmacy benefits, it can feel like you’re on the hamster wheel trying to fix everything related to your pharmacy benefits plan all at once. Most employers quickly realize they don’t have the bandwidth to do this, so they outsource it to PBMs, brokers, or advisors many of whom have conflicts of interest. A situation that ultimately leads to higher drug prices for employers like you.

But there is an alternative.

The 'Rule of One' Solution

To address the complexities of your pharmacy benefits plan and the overwhelm that’s often associated with managing them, try something I call The Rule of One.

Every month, commit to doing a deep dive into one aspect of your pharmacy benefits plan. For example, focus on drug formulary management and nothing else.

By focusing on one thing, you’re able to gain an understanding of that particular area with an appreciation for how it can be enhanced to achieve value for your drug spend.

No trying to solve every problem all at once and getting discouraged when you realize it’s an impossible task, just a step-by-step approach to acquiring the information you need to properly manage your pharmacy benefits.

The Monthly Transformation

Let’s consider the example of managing your drug formulary. For the first month, zero in on learning the basics of drug formularies: understand what a drug formulary is and the purpose it serves for your plan and your plan members; understand the structure of your formulary (e.g. is it a tiered formulary and if so, how many tiers are included and what differentiates them from each other); and understand how your PBM decides which drugs to include in your formulary.

The idea is simple — get a basic understanding of how a formulary works so that you can build a knowledge base allowing you to have more control over your organization's pharmacy benefits.

Once you’ve taken the first step, dive a little deeper. Understand the processes your PBM uses to make formulary listing decisions. Here’s a few questions to consider:

Does it explicitly evaluate the comparative effectiveness and cost-effectiveness of drugs it’s considering for formulary inclusion?

Does it review its formulary decisions as new evidence on a drug emerges?

Does it have processes in place to remove wasteful drugs from the formulary?

What role do manufacturer rebates play in formulary placement of drugs?

After a few weeks, you’ll notice something interesting starting to happen. You’ll have developed a baseline of practical knowledge to begin actively optimizing your drug spend. You’ll start being able to navigate important conversations with your vendors about how they’re managing your pharmacy benefits.

Asking some of these hard questions could lead to big dividends for you and your plan members. Here's some examples:

Employers who used cost-effectiveness as a criterion when making formulary listing decisions were able to reduce their PMPM total drug spend by 10%.

Employers who systematically eliminated wasteful drugs from their formularies reduced their drug spending by 9% to 15%.

Starting with one area will naturally lead you to explore information about other related areas. Focusing on managing your formulary would logically lead you to seek information about biosimilar strategies and approaches to manufacturer rebates.

And, over time, you’ll develop a basic expertise in various areas of pharmacy benefits, giving you the power to take a more hands-on approach to managing your drug spend, rather than relying solely on your vendors.

The Bottom Line

Optimizing your pharmacy benefits isn’t a ‘one-and-done’ proposition. It’s a marathon that requires you to develop some basic knowledge of a few different areas and apply it to your quest for drug spend value.

It also requires you as an employer to be in the driver’s seat. Yes, you can and should work with trusted vendors, but you also need to be able to ask them some hard questions, and sometimes even pushback on them. This means you need a minimum level of knowledge about every aspect of your pharmacy benefits plan.

Just think about it. Which employer’s going to get better value for their drug spend? The one who accepts the blanket statement from the PBM that they provide a ‘value-based formulary’ or the one who requests concrete, specific information on how the PBM establishes value and decides which drugs to include and exclude from its formulary?

The answer’s obvious, and it's exactly why you should use the Rule of One as a framework to acquire and expand your knowledge of pharmacy benefits so that you can have these kinds of conversations with your PBM and other vendors.

You don’t need to become an expert, you just need to use The Rule of One to gain the leverage needed to take control of your pharmacy 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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