“I knew we hired the best!”
— Sr. Benefits Specialist, State Utilities Company
PSG’s consultative approach to managing pharmacy benefits has been embraced on an ongoing, day-to-day basis by over 150 clients, representing more than 4.5 million covered lives. In addition, PSG serves some of the largest and most sophisticated purchasers in the country on a project basis, bringing the total scope of our consulting services to nearly 50 million lives. Representative case studies are provided below for each of the different clients we service.
BACKGROUND
A Fortune 200 energy company, headquartered in Chicago, IL with 32,000+ employees, including a union population, and a large number of retirees. The company was experiencing inordinate annual drug spend.
ACTION
PSG pharmacy benefit consultants performed a comprehensive clinical analysis, identified examples of waste, and discovered numerous cost saving opportunities. A detailed Request for Proposal (RFP) was fashioned specifically addressing the client’s needs and stretching the PBM’s commitment to keep their business.
RESULTS
PSG secured a renewed agreement with the incumbent PBM saving the company $50 million (15%) over three years. Significant contractual elements were negotiated and added including audit rights and targeted performance guarantees, leading to greater assurances and accountability. PSG was able to achieve these results for the client without member disruption.
BACKGROUND
A national, not-for-profit hospital system headquartered in Houston, TX with 17,000+ employees and an annual drug spend in excess of $24 million.
ACTION
PSG clinicians and financial analysts examined the client’s utilization, existing benefit design, and pricing structure. Exposing gaps and untapped savings opportunities, a new long-term agreement was negotiated. The implementation process was then given oversight by PSG pharmacy benefit consultants and account managers.
RESULTS
On PSG’s recommendation, the client transitioned to a new PBM relationship realizing more than $1.7 million in savings (5%). In addition to better contract terms and audit rights, enhanced flexibility was secured for the client for the development of specialized clinical and administrative programs.
BACKGROUND
A national retail and entertainment company headquartered in Dallas-Fort Worth with 10,000+ benefit-eligible employees. The company was experiencing an annual drug spend of $6 million with an increasing drug trend rate of greater than 14%.
ACTION
PSG conducted an in-depth review of existing contract terms and benefit structure. Oversight was provided for a competitive bidding process which included an investigation into each PBMs ability to provide custom support for a detailed redesign of benefit structure and clinical programs.
RESULTS
PSG negotiated a renewed agreement with the client’s PBM at significantly improved rates and contract terms. Ten targeted clinical initiatives were implemented that address cost gaps and the specific health needs of the client’s member population. PSG realized over $2.4 million in savings for the client per year, representing 40% of their spend.
BACKGROUND
A large, regional health plan in the East North Central United States with 130,000+ pharmacy beneficiaries. The health plan’s existing contract with the incumbent PBM was no longer market competitive and lacked key operational and performance guarantees.
ACTION
The health plan engaged Pharmaceutical Strategies Group (PSG) to develop an RFP and to provide guidance in evaluating PBM proposals. This process ultimately resulted in a renegotiated agreement with the health plan’s current PBM that better addressed their unique program needs, incorporated more specific, aggressive performance guarantees, and established a competitive financial model.
RESULTS
PSG secured a more favorable contract for the health plan with clearer financial disclosure and more meaningful operational and performance guarantees. Following PSG’s renegotiation efforts, the client realized more than $40 million, or, 12% in total pharmacy benefit spend savings over a three year period, without the need for transferring to an alternative PBM which would have added additional costs and would require additional resources.
BACKGROUND
Our client is a large, regional Medicaid Health Plan with more than 40,000 members. They currently use a major PBM for all pharmacy benefit management services. Program costs had been approximately $5 million annually. Prior to hiring PSG, there was no pharmacy management initiative within the health plan and there was little control or oversight of the PBM services.
ACTION
PSG performed a full, current-state analysis of the pharmacy program and developed a strategic plan that included improved contract terms, adding key PBM oversight measures, specific performance guarantees, negotiation of better discounts and improved plan operations with the eventual goal of NCQA accreditation.
RESULTS
PSG secured a more favorable contract for the health plan with clearer financial disclosure and more specific operational and performance guarantees. Following PSG’s renegotiation efforts, the client received more than $500,000 in contract savings and began realizing negative drug trend of -3.6% per-member, per-month (PMPM). These savings were achieved without the need for transferring to an alternative PBM which would have required additional costs and resources. Financial recoveries of $57,000 were also paid out to the plan following an annual PBM audit process which uncovered many pricing errors. Lastly, PSG was instrumental toward the plan achieving NCQA accreditation.
BACKGROUND
PSG was selected in a competitive bid process to assist a large regional health plan with an RFP for select pharmacy benefit management services including opportunities for in-sourcing various functions. A custom RFP was developed in consultation with the health plan to solicit both individual and bundled pricing options, along with expanded service offerings to better address future needs. In addition, PSG developed custom and proprietary weighting and scoring methodology in conjunction with the health plan to appropriately evaluate the submitted proposals.
ACTION
PSG’s comprehensive qualitative and quantitative analysis of responses from respondents resulted in the selection of three finalists for further consideration. PSG provided financial analyses during the course of further pricing and contract negotiations in support of a final award which provided the best “fit” for the health plan.
RESULTS
The resulting award represented over $70 million in savings over the current pharmacy program costs, or, about 4% of total drug spend. These savings were accomplished within the parameters of the budget and staffing plans already approved by the health plan. Revised contract language was also implemented to address future needs for flexibility and options for further in-sourcing of select functions.
BACKGROUND
PSG was asked to assist a large national labor union in the procurement of a single, more cost-effective, transparent, member-friendly pharmacy benefits program. The union had been trying to manage 36 different pharmacy programs under multiple PBM vendors.
ACTION
PSG designed a custom request-for-proposal (RFP) based on the client’s specific needs. PSG then initiated a pharmacy benefit manager (PBM) procurement process. After reviewing pricing elements and RFP responses from seven vendors using PSG’s proprietary analytical tools, pharmacy utilization data was compiled from 34 union regions. A pricing comparison was performed among the PBMs with special attention toward hidden costs. A customized, weighted scoring analysis based on vendor responses was produced and finalists were selected. Finalists conducted onsite presentations to union leaders and PSG and a single finalist was identified to administer the pharmacy program.
RESULTS
After completing the finalist process, PSG successfully secured a new PBM agreement for the client saving them more than $100 million over three years, while providing greater accountability and aggressive performance guarantees. Savings procured represent 10-12% of the client’s overall prescription drug expenses.
SUCCSESSFUL INTEGRATION
At the start of the relationship, PSG worked diligently to integrate each plan into the new national agreement. The 36 trusts represented by the union previously used 13 different PBMs, while three trusts had no PBM at all. All of the trusts’ programs contained different benefit designs (e.g., copayments), clinical programs, custom or grandfathered formulary arrangements, multiple eligibility feeds, and vendor relationships. Many had fundamental differences in demography, including provisions for Medicare Part D beneficiaries. After a year and a half, all trusts had been successfully integrated by PSG. PSG provided project management oversight for each implementation, working closely as a liaison between each trust/plan and Medco.
BACKGROUND
A large hospital system based in the Southeast United States with 36,000+ members and multiple locations. Annual pharmacy spend continued to rise, year over year.
ACTION
PSG’s lead pharmacy consultant, in conjunction with our clinicians and financial analysts provided the hospital system with support in the development and management of a redesigned pharmacy program that incorporates a custom formulary, value-based plan design, and an alternative purchasing strategy using hospital-based pharmacies. PSG also guided the development of clinical and members communication programs to increase participant understanding, compliance, and satisfaction.
A PBM was selected that could specifically execute on the unique needs of the hospital system, including wrapping services around the in-source functions of the hospital’s plan.
RESULTS
Annual savings from PSG’s analysis and resulting plan redesign are estimated at an initial $1 million. Projected three-year savings due to proper PBM selection and more effective goal alignment, along with improved pricing and more aggressive performance guarantees, are estimated in excess of $1.5 million.
BACKGROUND
A national, not-for-profit hospital system based in North Texas with 16,000+ employees. The hospital system retained PSG to assist in the analysis and optimization of its pharmacy benefits program.
ACTION
PSG began by measuring and evaluating the hospital system’s current PBM and plan performance. Next, we benchmarked the current PBM pricing and contract terms and conditions against best practices and market competitive norms. Lastly, we identified opportunities to reduce costs, increase efficiencies, mitigate risk, and improve PBM/program performance.
RESULTS
By implementing a strategic pharmacy benefit plan based on PSG’s findings, annual contract savings are estimated to be a minimum of $500,000, along with significant clinical savings opportunities of $1.5 million. Stronger alignment with the client’s goals and interests is projected through key contract wording modifications which hone the PBM’s operational commitments toward a “custom fit” with their enhanced pharmacy benefit strategy. Total savings opportunities are estimated to be in excess of $2 Million.
BACKGROUND
A national, not-for-profit hospital system headquartered in Houston, TX with 17,000+ employees and an annual drug spend in excess of $24 million.
ACTION
PSG clinicians and financial analysts examined the client’s utilization, existing benefit design, and pricing structure. Exposing gaps and untapped savings opportunities, a new long-term agreement was negotiated. The implementation process was then given oversight by PSG pharmacy benefit consultants and account managers.
RESULTS
On PSG’s recommendation, the client transitioned to a new PBM relationship realizing more than $1.7 million in savings (5%). In addition to better contract terms and audit rights, enhanced flexibility was secured for the client for the development of specialized clinical and administrative programs.
BACKGROUND
A State health plan covering 132,000+ lives. The state desired a more efficient and cost-effective pharmacy benefit program.
ACTION
PSG pharmacy benefit consultants successfully managed an “open bid” process for a new PBM working closely with the State Procurement Office. PSG then successfully supported the State with follow-up questions concerning the State’s vendor decision and to ensure the contract was not delayed (secondary to a strong process that could validate the results). PSG also updated the State’s contract language with the PBM to include clear definitions and performance guarantees to ensure the State achieved the performance levels proposed in the RFP process.
RESULTS
The State moved to an optimal PBM contract and delivery structure that improved transparency and minimized program cost. The State garnered overall pharmacy program savings of 8.8% due to the newly negotiated terms and program oversight.
BACKGROUND
A large public sector municipality based in Arkansas, with 19,000+ lives. The organization was unsure whether its contracted PBM was adjudicating claims according to original contract and plan requirements.
ACTION
PSG pharmacy benefit consultants and information technology personnel performed a comprehensive contract and plan compliance review and identified areas in which claims were being improperly adjudicated. These areas were indicated in PSG’s final Contract and Plan Compliance Review Report, and subsequently reviewed by the client with the PBM.
RESULTS
PSG recovered approximately $160,000 in wrongly processed funds for 12 months of claims data in the area of generic drug adjudications. The contracted PBM remitted the lost funds and committed to correcting the problem for all future adjudications.
© 2010 PSG - Pharmaceutical Strategies Group