When I was in high school, my first car was a dinosaur of a sedan.
To my sixteen-year-old self, that car was the greatest in the high-school parking lot. Sure, other kids at school had newer cars, but mine had a vintage mystique. The leather was worn and the exterior had some dings, but my car was classic, trustworthy, and dependable.
One afternoon, months after I purchased the car, I was driving home from school and went to turn right. I gripped the wheel, tried to turn, but the steering wheel would not budge. I had to pull as hard as I could just to make the slight turn into my neighborhood. Once I pulled into the driveway, I popped the hood and started poking around. I unscrewed the power steering lid out of sheer luck and opened it. What did I find inside?
The first question you might ask is – why had I never checked under the hood of my car before? Good question! But to my credit, the car ran just fine and I had no reason to check under the hood. Nonetheless, even if I had popped the hood, I didn’t know which valves to check to make sure it would run smoothly.
Healthcare is much more complicated than an old car, but the morals of the story hold true.
Like a trustworthy car, once health insurance plans are implemented and running, it can be difficult to pop the hood and check each valve to make sure the plan is operating as cost-effectively and smoothly as possible.
If you’d like to take a look under the hood of your own self-funded plan, specifically looking at the pharmacy benefit management valve, start by asking these five questions:
Is my Pharmacy Benefit Manager actively improving the health of my employees?
- The primary purpose of health insurance plans is to provide quality healthcare to employees. Every HR Director and CFO wants their company’s employees to be happy and healthy, but why are pharmacy benefit managers usually not considered an influential component to improving health?
Innovative PBMs offer services that can directly impact the health of employees. From medication therapy management (MTM) interventions, to face-to-face consultations to help employees manage chronic conditions such as asthma, COPD, diabetes, and cardiovascular disease, PBMs can be an asset to the health of your employees. By improving overall health, innovative PBMs offer additional value by directly impacting the amount of money spent on medical claims.
Be sure your PBM has an action plan to actively improve the health of your employees. Not only will your employees benefit, but total pharmacy and medical claims can also decrease.
Is my Pharmacy Benefit Manager using spread-pricing?
- Many pharmacy benefit managers utilize a pricing technique called “spread pricing”.
- In a nutshell, spread pricing is the practice of “charging a health plan more than the PBM pays the pharmacy for filling a prescription”. Once the plan is charged the higher amount, the PBM pockets the difference as profit.
Although this is an unfortunately common practice in the traditional PBM model, many CFOs and HR Directors are not aware of the vast amounts of money this pricing costs the plan. Since the strategy is not explicitly stated in the contract, decision makers are usually unaware that this pricing technique is being used.
Fortunately, there are alternative pricing models that gatekeepers can request their PBM use. Pass-through pricing is where the PMB charges the plan sponsor the exact amount the pharmacy was paid for each prescription.
If the drug pricing calculations are not explicitly stated in your PBM contract, there is a high probability that your plan is paying for spread pricing. Be sure your PBM is utilizing a transparent pricing model that actively works for your employees and organization.
Is my Pharmacy Benefit Manager guaranteeing rebates?
Along with spread pricing, the typical PBM does not pass the rebates they collect from drug manufacturers back to the plan sponsor. The sad truth is that many PBMs are making large amounts of profit by not disclosing the rebates they aggregate.
Ideally, your PBM contract should clearly specify the level of guaranteed rebates owed to your organization.
Ensure you are working with a PBM that transparently lays out the ways in which they make money. If your PBM is not able to give you a straight answer, chances are there’s something to hide.
Does my Pharmacy Benefit Manager have a plan for specialty drugs?
Specialty drugs are a hot button topic in healthcare, and for good reason. “In 2015, only 1% – 2% of the American public used specialty drugs, yet they accounted for approximately 38% of total drug expenditures”.
Prior authorizations, the act of blocking a claim for a short period of time and allowing a healthcare expert to review its medical necessity, are the primary tool used to manage specialty drug costs within a benefits plan. If your PBM retains all the rebate money from drug manufacturers, a conflict of interest can arise when deciding if expensive brand-name drugs should be approved within a plan. Be sure your PBM has a transparent and robust prior authorization program that protects the employee and the plan sponsor.
Specialty drugs are wildly expensive; however, in some cases, these drugs are also the most effective for treating specific illnesses. Almost all specialty drug manufacturers offer co-pay assistance programs to help patients afford their medications. By applying for this financial assistance, patients are able to afford a drug that was once impossible to purchase. Be sure your PBM has a gameplan to utilize copay assistance to the benefit of your employees.
These are just two of the options available in fighting rising specialty drug costs.
Currently, the cost of an average specialty medication is ~$5,000/month, and the specialty drug category will only keep growing. The stakes are high, so be sure your PBM has solutions in place to address the entire specialty drug category.
Is my Pharmacy Benefit Manager accountable to my organization?
When companies elect to go self-funded, the search for a trustworthy Third Party Administrator can be arduous. Once a company is identified, it can be easy to simply plug in the PBM that the TPA recommends to get the plan running.
Although this “plug and play” option can be simple, it can also dramatically impact plan costs. Based on the four reasons listed above, innovative pharmacy benefit managers can be a valuable piece of the health care puzzle. Not only can PBMs positively impact the health of your employees, they can also drive significant cost savings for your organization.
Ensure your pharmacy benefit manager is carved out from your TPA so they are directly accountable to your organization. By signing direct agreements with your PBM, you can monitor performance and cost savings year over year. This direct contract gives you the ability to renew or terminate your PBM contract directly based on their performance, not on the TPA’s recommendation.
In conclusion, although it can be difficult to look under the hood of your self-funded benefits plan and check each valve, it is essential to ensure your plan is running smoothly and cost-effectively for years to come.
Because we all know, the last thing you need is to be stuck on the side of the road.
If you are interested in learning how the Sona Benefits PBM model differs from traditional PBMs, please visit www.sonapharmacybenefits.com or give us a call at 828-545-7181.