Understanding the Employer Advantages of Pharmacy Benefits Managers (PBMs)
Pharmacy Benefits Managers (PBMs) are important in helping employers manage their pharmacy benefits programs effectively. By collaborating with drug manufacturers and wholesalers, PBMs secure medication discounts and design cost-saving pharmacy plans customized to organizational needs. They also handle administrative tasks such as processing claims and managing rebates. This comprehensive support helps reduce healthcare spending for both employers and employees. Here's a closer look at how PBMs assist employers and what to consider when working with them.
How Pharmacy Benefits Managers (PBMs) Reduce Healthcare Costs for Employers
PBMs negotiate quantity discounts on medications with drug manufacturers and wholesalers, which helps lower employer and employee healthcare expenses. By curating pharmacy benefits plans that offer affordable medication options, PBMs can effectively reduce overall costs. They also recommend different plan designs and clinical programs that contribute to cost savings.
The Role of PBMs in Designing Effective Pharmacy Benefits Plans
In the initial phase of collaboration, PBMs and employers develop a customized pharmacy benefits plan to address the organization's specific needs. This involves selecting suitable deductibles, copayments, and coinsurance options. Once the plan is established, PBMs manage prescription benefits, ensuring alignment with the employer's requirements.
How PBMs Manage Prescription Benefits for Employers
PBMs are responsible for the comprehensive management of prescription benefits. This includes processing claims, managing rebate reimbursements, and running clinical programs. They also review drug utilization to ensure the plan's effectiveness and educate employees about their medication options. Support services are provided through call centers, websites, or mobile applications to assist with any questions about benefits and health insurance plans.
Benefits of Partnering with a Pharmacy Benefits Manager (PBM)
Partnering with a PBM allows employers to access negotiated discounts and a range of cost-saving measures. PBMs offer pharmacy plan design and administration expertise, ensuring employers and employees benefit from reduced healthcare spending. They also provide ongoing support and education to help employees maximize their benefits.
Optimizing Healthcare Spending with Pharmacy Benefits Managers (PBMs)
PBMs are crucial in optimizing healthcare spending by providing specialized pharmacy benefits plans and negotiating better medication prices. Their involvement helps employers manage costs effectively while ensuring employees access necessary medications at lower prices. PBMs also support employers with plan administration, rebate management, and employee educational resources.
Key Factors to Consider When Selecting a Pharmacy Benefits Manager (PBM)
Choosing the right Pharmacy Benefits Manager (PBM) can significantly save healthcare costs for employers and enhance employees' understanding and use of their benefits. However, selecting the wrong PBM could undermine these potential advantages. Employers should keep the following factors in mind when evaluating and selecting a PBM:
Clarify Contract Language
PBM contracts are often complex and challenging to understand. However, thoroughly reviewing them is crucial for employers to grasp the PBM's contractual obligations. Even simple terms, such as "generic," can have different meanings for PBMs. Therefore, employers need to seek clarification during the contract negotiation process. Employers should pay special attention to sections on rebate caveats and exclusions, administrative fees, and per member monthly costs.
Review the Formulary and Product Mix
The U.S. Food and Drug Administration (FDA) approves medications based on safety, not efficacy. Consequently, not all FDA-approved drugs are clinically valuable or beneficial for everyone. Many manufacturers produce lower-cost combination products or new formulations that are safe but only sometimes valuable to patients. Employers can ensure their PBMs provide valuable medications by reviewing the formulary and product mix in their contracts. Additionally, employers can request that PBMs use standard formularies or create a list of high-cost, low-value drugs for review.
Evaluate Pricing Options
There are two common pricing arrangements for PBMs: transparent and traditional. In traditional pricing, PBMs earn revenue through discount or rebate spreads and typically do not charge administrative fees. With transparent pricing, employers pay administrative costs and any additional ancillary or program fees. This arrangement allows the employer group to receive the total value of rebates on claims and ensures they are charged the same amount the PBM pays the pharmacy. Each pricing option has its advantages and disadvantages. Employers should carefully evaluate which arrangement suits them best before signing a PBM contract.
Look for a PBM Using a Drug Price Index
Choosing a PBM that utilizes a drug price index, such as the National Average Drug Acquisition Cost (NADAC), can help employers reduce net costs. The NADAC price list, which is publicly available, shows the model many PBMs use for pricing drugs. Selecting PBMs that use a drug price index ensures they earn revenue from administering benefits plans rather than prescription drug spending.
Review Discount and Rebate Guarantees
Successful rebate negotiations can substantially reduce employers’ healthcare spending. However, discount and rebate guarantees are not typically included automatically in PBM contracts. Employers can maximize savings by requesting these guarantees from potential PBMs and thoroughly reading the contract's fine print to ensure these savings are passed on to employee groups.
Assess Specialty Drug Management
Specialty drugs account for a substantial portion of overall healthcare spending, often used to treat chronic and complex conditions such as cancer and multiple sclerosis. It is critical to find a PBM with effective tools to manage the utilization and cost of these drugs. Employers should inquire about PBMs' prior authorization approval rates, the dispensing process for specialty drugs, and any measures to prevent inflated prices before finalizing a contract.
Evaluate Refill Thresholds
Over-dispensing can occur with popular auto-refill programs, which automatically fill prescriptions when they reach their refill threshold, typically around 75%. While this can help some plan members who might need to remember to refill their medication, it can also lead to over-dispensing and overspending. Employers can address this issue by negotiating higher refill thresholds with their PBMs during contract discussions, helping to eliminate drug waste and unnecessary spending.
Conclusion: Partner with CBC Health Insurance Marketplace for Comprehensive Benefits Solutions
Effective Pharmacy Benefit Managers (PBMs) are essential for helping employers optimize drug spending, safeguard employee well-being, and ensure the overall success of their employee insurance plans. Employers must perform thorough due diligence when selecting PBMs to ensure they meet organizational needs and align with company values. Although this process can be complex and time-consuming, employers who invest the effort to evaluate their options will likely achieve significant cost savings and increased benefits utilization.
Contact us today for more information on how Custom Benefit Consultants (CBC), Inc. can assist you in choosing the right PBM and enhancing the value of your employee benefits.
FAQs
What Are the Key Benefits of Working With a Pharmacy Benefits Manager?
Pharmacy Benefits Managers (PBMs) provide employers with medication cost savings, administrative support, and customized pharmacy benefits plans. They negotiate discounts, manage rebates, and offer tools to monitor and optimize prescription drug spending, which can lower healthcare costs for employers and employees. Additionally, PBMs support employee education on benefits usage, enhancing overall plan effectiveness.
How Do PBMs Help Control Specialty Drug Costs?
Specialty drugs, often prescribed for complex conditions, are costly and make up a large part of healthcare spending. PBMs control these costs by implementing programs such as prior authorizations, monitoring dispensing processes, and negotiating discounts. They may also set protocols to prevent overuse and ensure only clinically necessary medications are dispensed, helping employers reduce expenses tied to specialty drugs.
What Is the Difference Between Transparent and Traditional PBM Pricing?
Traditional PBM pricing involves the PBM earning revenue through rebate spreads and not charging administrative fees, while transparent pricing requires the employer to pay administrative costs directly. In a transparent model, the employer receives the total rebate value, and the PBM charges the employer the same price it pays the pharmacy. Employers can choose the model that best aligns with their financial and plan goals.
Why Is Reviewing the Formulary Important When Selecting a PBM?
Reviewing a PBM’s formulary ensures the list of covered drugs aligns with organizational needs and focuses on clinically effective options. Not all FDA-approved drugs are equally valuable, so reviewing the formulary helps employers avoid paying for costly medications that may offer limited benefits. Employers can also request exclusions for high-cost, low-value drugs to optimize costs and ensure that only effective medications are covered.
How Do Refill Thresholds Impact Prescription Costs?
Refill thresholds determine when a prescription becomes eligible for refilling. If set too low (e.g., 75%), these thresholds can lead to over-dispensing, resulting in excess medication and increased costs. Employers can negotiate higher refill thresholds with PBMs to minimize waste, ensure that medications are refilled only when necessary, optimize costs, and reduce unnecessary spending.
