Over the past few years, a number of articles have been published on rising drug costs through various media outlets. The increase in media attention has resulted in a number of business leaders asking if something can be done within their own companies to control costs. Manufacturing, higher education, health care, financial institutions and many other industries are struggling to meet the challenges of rising drug costs on their health plans.
Much like gasoline prices, which vary from day to day and station to station, drug prices follow a similar trend as they differ at every pharmacy and change daily. Additionally, new OTC medications, generic medications, and brand-name and specialty medications are always changing the market. Traditionally, pharmacy benefit managers (PBMs) are contracted to manage these costs for employers, but many PBMs manage plans to their benefits by focusing on protecting or ensuring their own profitability rather than their clients’ benefit. Many PBMs promise to deliver savings in subsequent plan years; however, many never do and provide myriad reasons for not delivering. Although the problem is multifaceted and complex, several solutions exist.
One option is to hire a knowledgeable and experienced pharmacy benefit consultant. Independent consultants work on behalf of your company, whereas PBMs often work on behalf of their own interests. For example, if your health and pharmacy benefit managers are focused on average wholesale price (AWP) discounts and rebate guarantees, it is highly likely your plan will not be managed well. Negotiating higher rebates is like negotiating a higher-priced house to receive a bigger tax incentive. Pharmacy benefit contracts and plans are highly complex, but when managed well, your drug spend could be reduced by 30%-40% simply by implementing some key pharmacy benefit strategies.
If you choose not to hire an independent consultant, company leadership should thoroughly research PBMs before partnering with one. Look for PBMs that can work to manage the plan for a set fee, disclose their revenue streams and bring ongoing innovation and cost mitigation strategies to the table.
If you choose to hire a consultant, there are a few steps you should take and questions you should ask. Make sure your consultant is familiar with innovative strategies to manage costs and that they can navigate complex PBM contracts and disclose any financial relationships with PBMs. Once you’ve settled on the right consultant for your company, the first step is to have the consultant conduct an analysis on claims pricing, rebates, pharmacy network utilization, formulary, prior authorizations, copays, specialty utilization, adherence and member health.
The consultant should review the contract terms with your PBM as well. The first question your consultant should seek to answer is if the current plan is being managed to the contract as many are not. The next step is to evaluate overall opportunities to improve performance. Sometimes an improved and well-negotiated contract can result in significant savings. From this point on, evaluating your options will be key to make sure that the solutions result in the improvement of the overall plan.
One last thing
Is your “independent” consultant paid by your PBM to keep the plan “status quo?” Will the improvement in your plan result in a reduction of your consultant’s revenue from the PBM? You’ll find that some consultants will “sell” PBMs that pay them well without disclosing that information to their clients. These questions should be a key starting point for discussion with your consultant.