For years, rebates have been a dominant factor in the drug pricing equation for plan sponsors. To maintain affordability, employers have had to accept a supply chain where prices are inflated but reduced through rebates—giving plan sponsors little insight and control over true drug costs. Consumers are selecting high-deductible health plans that require patients to pay these inflated costs at the point-of-sale until their deductible is met.
Some of the ways in which the plan and member benefits are managed can result in higher rebates while unknowingly increasing utilization and point-of-sale costs. When measuring total expenditure through discount pricing guarantees and rebates only, the evaluation of drug mix and volume is missing. A better approach not only considers financial factors such as ingredient cost and rebates, but also incorporates clinical factors such as utilization and formulary management to measure the total net cost. The best opportunity to address total drug management and achieve the lowest net cost is to assess both pricing and drug management solutions during a procurement process (RFP) for PBM vendor selection.
The three clinical criteria include:
These three components work together: formulary management influences the drugs available to patients, while utilization management and prior authorization influence the volume and use of the medications available. Both of these latter factors greatly impact the cost that patients and plan sponsors incur.
During your procurement process, be sure to:
Not only is evaluating your PBM arrangement important, but it’s also essential to protect your plan from future costs in a constantly shifting drug market. To do so, be sure that your RFP includes these capabilities in a potential PBM vendor:
Understanding how rebates and lowest net cost factor into your RFP can ensure you get the best price protection in a volatile industry. PSG can help. We offer clients impartial expertise in all areas of PBM relationship management—from full-scope procurement services and program implementation to critical drug pricing metrics. Contact us for a consultation today or download our PBM procurement case study to learn more!