Reverse Your Rx Drug Trends

Prescription Drug Costs Are Like A Runaway Train. Annual Cost Increases In Recent Years Have Averaged 7% to 15%, and Experts Project Even Greater Increases May Occur In the Future.

Here Are A Few “Starter” Ideas For Reversing This Run-Away Trend. Contact Pharmacy Benefit Consultants, And We’ll Provide You With Still More:

Renegotiate Your PBM Contract: Most PBM/Client contracts enable PBMs to generate “profit spreads” in numerous ways, rather than requiring PBMs to “pass through” all potential savings to clients. Thus, the AWP Definition in PBM/Client contracts enables PBMs (and retail pharmacies) to retain all “bulk purchase savings”. MAC Definitions allow PBMs to charge essentially whatever they want for generic drugs. And PBMs keep virtually all manufacturer payments and discounts through a host of boilerplate terms PBMs include in clients’ contracts.

Accordingly, the “key” to reversing your ever-increasing drug costs is to amend your current contract, or draft and execute an entirely new contract. Pharmacy Benefit Consultants – in contrast to other consulting firms – will provide your firm with a lawyer knowledgeable about contracts and all PBM contracting “games” to enable you – not your PBM – to benefit from numerous available savings.

Conduct A Sophisticated RFP (Request for Proposal): Most RFPs prove to be of little or no value. Purportedly sophisticated consulting firms “re-price” their client’s claims tapes to analyze the financial savings that might result from using each competing PBM’s purported pricing; However, the “winning” PBM almost never provides in an executed contract the pricing that the consulting firm analyzed.  Similarly, competing PBMs make oral and written promises to “win” a consulting firm’s RFP, but the winning PBM’s promises are almost never memorialized into the client’s actual contract with the PBM.

Pharmacy Benefit Consultants conducts its RFPs differently.  Our firm drafts an entirely different form of PBM contract for its clients, and requires competing PBMs to agree to all contract terms — or be eliminated from the RFP.  Our firm also uses the RFP’s leverages to force PBMs to provide better and better pricing terms and pricing guarantees, and then requires each PBM contestant to bind itself in an executed contract to the terms the PBM has proposed — before a PBM “finalist” is selected.  As a result, when our RFPs are over, our clients have obtained the best pricing terms that are available, and PBMs cannot escape the promises they have made.

X-Ray Your PBM’s Drug Costs, and Your Employees’ Drug Use: Virtually all PBMs tout their generic dispensing rates, but fail to mention that they are retaining much of the savings available from generic drugs.  To end PBMs’ practices, our firm has developed the ability to “X-Ray” our client’s claims data to quickly assess a PBM’s average invoiced cost for the commonly used generic drugs. Our drug “X-Ray” also assesses our client’s “drug mix”, meaning the market share of each brand drug and generic drug in certain core therapeutic drug categories.  We can then project exactly how much will be saved if  (i) our client renegotiates its contracts to force the PBM to charge an appropriate price for each generic drug, and (ii) the client changes its “drug mix” by incentivizing its employees to use lower-cost drugs in each therapeutic drug category.

Rather than squandering money on high-cost audits which almost never result in recovered dollars, retain our firm to run a low-cost prescription coverage “X-Ray”, and learn how much you can save  if you change your contract terms and your “drug mix” simultaneously.

Replace All “Spread Pricing” Contract Terms with “Pass-Through Pricing” Contract Terms: Virtually all existing PBM/client contracts are based on “spread pricing”.  The PBM pays for each retail/mail/and specialty drug that will be dispensed at one price, but invoices its client based on a different, typically far higher price for the same drug, and therefore makes a “profit spread” on each drug dispensed.  Even those contracts that are purportedly “pass-through contracts” typically are only “pass-through” for retail pharmacy drugs, meaning the contracts still contain “spread pricing” for every mail or specialty drug dispensed.

If you draft entirely different contract language, and completely eliminate all “spread pricing” terms and replace them with “pass-through pricing” for every drug dispensed, you will definitely decrease your drug costs.

Eliminate All “MAC” Pricing Terms: To ensure that you obtain “pass-through pricing” for every drug dispensed, you also must eliminate all “MAC pricing” terms in your PBM contract.  That is because the definition for “MAC” in every PBM contract states that the PBM can invent any “MAC” or “maximum allowable cost” it wants for any drug it wants, and change its MAC pricing whenever it wants.

Clearly, if a PBM/client contract is based on “pass-through pricing” for every drug dispensed, PBMs must invoice the client based on the PBM’s actual acquisition costs, not on invented MAC pricing that typically bear no relationship to actual acquisition costs.

Require A “Pass-Through” Of All Manufacturer Payments and Discounts: Federal and state litigation – as well as numerous lawsuits filed on behalf of individual companies – have alleged that many PBMs have wrongfully manipulated their contracts with manufacturers to deprive PBM clients of savings. PBMs do so by playing (what our firm calls) the “PBM Labeling Game”.  Here’s how the “Game” works:

In contracts with clients, PBMs agree to pass-through any manufacturer payment that is labeled a “rebate”. However, in contracts with manufacturers, PBMs invent numerous labels in addition to “rebates” (such as discounts, administrative fees, prompt payment fees, health management fees, data sales fees, etc.), and PBMs arrange to have most manufacturer monies characterized with those labels rather than the “rebate” label.  As a result, most of the financial benefits that manufacturers (and other third parties) provide  to PBMs are never passed through to PBMs’ clients.

To ensure that all savings from manufacturer payments are passed through in the future, clients must create an entirely different form of PBM/client contract that obligates their PBMs to  (a) pass-through all third party financial benefits — not just rebates; and (b) requires the PBMs to provide full disclosure of all contracts with all manufacturers and other third parties to enable the clients to verify that all financial benefits are being passed through.