Drug prices are skyrocketing, and it’s creating major challenges for your pharmacy. In times like these, you’d hope that your pharmacy benefit manager (PBM) is negotiating the best possible deals for you and others involved; but most often, they’re not. PBMs tend to be secretive about their addition of streams of revenue for themselves. In fact, the Federal Trade Commissions (FTC) plans to investigate the inner workings of PBMs.
Some states are cracking down on what PBMs are doing, too. Though it’ s hard to predict what may happen next, it’s an important time for you to stay informed and really nitpick their answers to the questions listed below.
Where is their revenue coming from?
PBMs’ profits come from numerous unreported sources. This allows them to pocket more than they should without sharing the savings. Their profit sources include:
- Sizable drug manufacturer rebates, administrative fees, or other hidden incentives from manufacturers.
- Profitable spread-pricing tactics in which payments made to pharmacies are lower than what you pay as an employer.
Is your PBM including more high-cost, brand-name drugs in your list (of drugs your health plan covers) than generics?
They might include higher-priced, brand-name drugs in your list to earn more in total revenue. The higher the drug price, the more money your PBM makes. They have the power to decide what’s included in your formulary. They often select the medications that will make them the most money. What’s more, they may not include any generic versions with lower costs and the same level of effectiveness.
How do they ensure that high-cost drugs are only dispensed when it’s medically necessary?
An effective way to curb prescription drug spending is to use clinically approved generic medicines instead of brand-name drugs. Ask your PBM about their generic-use rates. These rates should be at least 90 percent. A one-percentage-point increase in use of generics could cut pharmacy costs by about five percent, according to HealthPartners’ data.
How does your PBM support members to ensure they stick to their therapy regimen?
Some of your patients find it difficult to take multiple medications correctly and often need help. Some, but not all, health plans or PBMs offer medication therapy management (MTM) programs with clinically trained pharmacists and disease-and-case management services. These programs can help them take their medications safely, stabilize conditions, and prevent costly visits to the emergency room.
Will your PBM allow you to hire an outside, independent auditor to periodically review how they’re doing?
A PBM vendor promises a lot in terms of guaranteed performance, pricing, and service delivery. But that doesn’t mean you should just take their word for it. In order to know if they’re actually doing what they promised, it’s a good idea to hire an outside auditor to review how your PBM is doing periodically. Auditors often find errors that result in the vendor needing to pay back significant sums of money.
Are you allowed to cancel your contract if you’re not satisfied?
You should always have the right to cancel a contract if your PBM vendor is not what you had hoped for. Do you understand what kind of fees you will be charged for terminating a contract early? Pinpoint in the contract where it specifies what closing your account will look like in terms of timing, transfer of information to a new vendor, and other operational matters.
Do you have a solid clause in the contract requiring your PBM to regularly monitor and report on actual discounts they’ve achieved?
This is a performance guarantee. If certain discounts are not achieved as projected, then any deficiency should be returned to the employer.
Signing a contract with a PBM vendor can feel daunting. This is why getting a full view of how a PBM company operates, what it does, how it determines pricing, and what you should expect is so important. PBMs know this, and that’s why they don’t expect you to ask that certain protections and clarifications be included in the contract language. That’s why you must know specifically what to ask for before you sign.
A Member-Owned Company Serving Independent Pharmacies
PBA Health is dedicated to helping independent pharmacies reach their full potential on the buy-side of their business. Founded and owned by pharmacists, PBA Health serves independent pharmacies with group purchasing services, wholesaler contract negotiations, proprietary purchasing tools, and more.
An HDA member, PBA Health operates its own NABP-accredited secondary wholesaler with more than 6,000 SKUs, including brands, generics, narcotics CII-CV, cold-storage products, and over-the-counter (OTC) products — offering the lowest prices in the secondary market.
