3 considerations for selecting a truly transparent pharmacy benefits partner
While the word “transparency” is commonly used across the PBM industry, the reality is that not all transparency is created equal.
Prior to the COVID-19 pandemic rattling the economy, data from the National Pharmaceutical Council showed that 63% of employers felt that pharmacy benefit managers (PBMs) are not transparent. With many companies looking to better manage expenses and ensure affordable access to prescriptions in today’s uncertain landscape, it’s more important than ever for benefits professionals to work with a transparent partner and find ways to reduce prescription drug costs for their employees.
Although “transparency” is a widely used term across the PBM industry, varying definitions of this buzzword, as well as hidden costs and missing data, can skew PBM evaluations and cause employers to pay too much for their pharmacy benefits.
Related: Resolving to control drug costs: Your PBM contract really matters
So how can benefits professionals effectively manage their pharmacy benefit costs and ensure they’re getting true transparency? Here are three guiding questions benefits professionals and plan sponsors should ask themselves when selecting a PBM partner to help improve benefit plan performance and increase savings:
What type of business model does your company align with?
Making the effort to understand a PBM partner’s business model is essential because it affects all other pharmacy benefit decisions available to an employer group, such as how much access to data an employer has or what plan metrics you’d like to meet, including individual discounts or all-in, net-net pharmacy costs. This can have a significant impact on a company’s ability to reduce drug spend.
Two major PBM models are available for consideration: traditional and pass through. A traditional model offers volume discounts and high rebates to achieve cost savings. This type of model is less transparent about its business practices and requires strict adherence to contract details. A pass-through model passes 100% of all discounts and rebates back to the plan sponsor, and an admin fee is its only source of revenue. In this type of model, business practices and fees are fully visible and auditable.
When deciding on a PBM, consider how much flexibility you want with plan design, how hidden income streams may impact what you actually pay, and how much audit accessibility your company would benefit from—each PBM model has fundamental differences on how they operate for clients. Benefits professionals need to weigh which will best fit their company’s philosophy and goals.
What role do you want to play in managing your pharmacy benefit?
Knowing what kind of role you want to play in managing the company’s pharmacy benefit is critical. Some benefits professionals prefer to select a partner and let them handle all aspects of their PBM program, while others want to be involved so they can better understand their pharmacy costs and how it’s impacting their employees.
Working with a transparent, pass-through PBM gives you the ability to understand your true total costs, monitor performance and results, and make informed decisions to better manage expenses. Furthermore, a transparent, pass-through PBM partner should allow you to audit 100% of your claims. Non-transparent PBM providers have full control of your company’s claims data, meaning they can control what information you audit, what auditor you use, and even sell your pharmacy data to other companies.
While most plan sponsors don’t take the time to audit their PBM, it’s a good idea to have the ability to do so. You should play an active role in managing the pharmacy benefit so you can view all claims and data, as true transparency means having open access to all your data and information. Then use that access to data to fine-tune your benefit plan and better manage your pharmacy costs.
Is your company planning to work with a consultant?
Many benefits professionals will choose to work with a consultant to help them through the complex PBM selection process, yet there may be some behind-the-scenes considerations. For example, some consultants may struggle with how to evaluate traditional models compared to a pass-through model. And some may have arrangements with large PBMs that can influence which partner they recommend a client pursue, meaning you may not be getting the most “objective” recommendation.
It’s important that plan sponsors and benefit managers work with a consultant or advisor who will follow an objective process and is well-versed in how to evaluate both PBM models. For example, consultants who work with new, objective tools and resources to help them look at different aspects of the evaluation methodology can offer a more accurate point of view on your organization’s projected drug spend and may be better at comparing traditional vs. pass through models.
While the word “transparency” is commonly used across the PBM industry, the reality is that not all transparency is created equal. Ultimately, transparency should be an operational way of doing business that translates into lower costs. Making the most cost-effective decision for your organization relies on having a clear view into PBM business models, your desired level of involvement in managing the pharmacy benefit, and ensuring your company works with objective advisors. True transparency should align with your company’s business goals and provide the ability to have open access to all pharmacy benefit data, so you can control your drug spend.
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