Employers Need New Evaluation Process of PBMs to Control Drug Costs

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Pharmacy Benefit Manager Evaluation Process

The evolving nature of healthcare requires that the process used by benefit plans to select their pharmacy benefit managers (PBMs) needs to evolve as well.

For the first time this year, large employers noted a surge in spending on pharmaceuticals as a top cost driver of health costs according to findings from the NBGH Large Employers’ 2017 Health Plan Design Survey. Specialty pharmacy benefits in particular have increased in cost and use garnering the attention of employers nationwide.

Many companies follow a traditional RFP approach when selecting a PBM. Prescription drugs are listed and the costs associated with each drug are tallied in a spreadsheet. Benefit specialists need to try and understand the way a PBM manages prescription drug spending to get a clearer picture of costs for their organization.

A recent Benefits magazine article titled, Choosing a PBM: Is Your Plan Asking the Right Questions notes the most important metric to use is a per employee per month (PEPM) cost analysis because it takes into account every dollar spent, including discounts, rebates, administrative fees and unnecessary prescriptions that were filled.

Talking with a potential PBM about using this approach will help create accountability for managing prescription drug spending. A new PBM contract can ask for them to commit to a maximum PEPM cost for the first year of the quote or to create a 12-month cost projection target that if not met would eliminate some of their fees.

The article also suggests looking at additional cost containment measures. Many PBMs use step therapy, which requires an employee to try a lower cost alternative before being prescribed a higher cost drug.  The influence of advertising direct to consumer today, makes utilizing this type of program important for controlling prescription drug costs. A PBM may also institute prior authorization requiring employees to obtain approval from the drug plan before a drug claim will be approved for payment.

Employee benefit costs continue to rise every year. While benefits are valuable tools to an employer for recruitment and retainment, a balance must be struck to maintain a reasonable cost structure for one year to the next. Organizations are recognizing the impact prescription drug costs can make on their budget and now need to take the steps to change their evaluation process of PBMs to get a more complete picture of drug costs per employee per month.

Source:  Benefits Magazine. Choosing a PBM: Is Your Plan Asking the Right Questions? March 2017. PP28-33.

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