To decrease their prescription coverage costs, many Plans conduct PBM RFPs. However, these RFPs almost never result in lower prescription coverage costs.
Why is nothing achieved?
Because virtually all consulting firms make two critical mistakes when conducting RFPs for their clients:
The First Mistake. Rather than focusing on the single document that matters – the PBM contract – consulting firms conduct questionnaire-focused RFPs: At the beginning of their RFPs, the firms issue questionnaires for PBMs to complete. During the RFPs, consulting firms spend their time evaluating PBM contestants’ questionnaire responses, which contain nothing but “representations” and “promises”. At the end of their RFPs, consulting firms recommend a PBM Finalist based on spreadsheet analyses of the financial “promises” made by each PBM contestant in their questionnaire responses.
Thus, Plans make their PBM selections having paid little – or no – attention to the terms of their next PBM contract. And only after their RFPs are over do Plans try to negotiate a better PBM contract. Making matters worse, when they do, Plans have little knowledge of contract loopholes, and Plans have lost the RFP’s leverage to obtain better PBM contracts.
The Second Mistake. During their RFPs, consulting firms also fail to pay attention to their clients’ existing “drug mix” that is typically composed of numerous high-cost drugs. Instead, consulting firms “chase rebates” and favor the PBMs that offer the largest rebates. In so doing, consulting firms allow PBMs to continue their widespread practice of bidding high rebates for high-cost drugs and thus winning RFPs, rather than blocking those drugs and recommending lower-cost replacements.
Since lower-cost drugs without rebates will always result in lower aggregate costs for Plans than high-cost drugs with large rebates, consulting firms that “chase” large rebates in RFPs cause their clients’ costs to increase, not decrease.
Pharmacy Benefit Consultants prevents its clients from falling victim to either of the above errors.
First, our firm conducts contract-focused RFPs. We realize that a PBM RFP must be a legal process to extract an entirely different form of PBM contract that is devoid of all loopholes.
Accordingly, before our RFPs begin, we draft an airtight PBM contract that eliminates all loopholes. We issue our RFPs with our contract attached, and require all PBM contestants to mark-up our contracts and fill-in more than 1,000 “blanks” with pricing terms and guarantees. Then we use our RFPs’ leverage to require PBM contestants to agree to our contract terms and to extract the strongest pricing terms and guarantees that are available in the marketplace. Before we conclude our RFPs, we require each PBM contestant to execute a binding “contract offer”.
As a result, at the end of our RFPs we provide our final analyses based on the actual contract terms each PBM contestant has offered. And since we’ve already obtained binding “contract offers” from PBM contestants, our clients are positioned to execute the already-negotiated, loophole-free binding contract offers immediately after they select their Finalist PBMs. No further contract work is needed.
Second, our firm never “chases rebates” during RFPs.
Before we launch our RFPs, our firm conducts in-depth claims data analyses for each of our clients. We identify high-cost drugs that could easily be replaced with lower-cost substitutes, and make recommendations to each client on how best to change its drug coverage. When we launch our RFPs, we create a Contract Exhibit identifying our client’s decisions about drug exclusions, as well as customized Prior Authorization, Step Therapy and Quantity Limit protocols. And we tell all PBM contestants to propose pricing terms and guarantees based on our client’s customized drug changes.
As a result, we preclude PBM contestants from bidding high rebates on drugs that shouldn’t be dispensed or that should be controlled through customized programs. We also position our clients to obtain far greater savings as soon as they implement their new contracts.
If you want to learn more about our step-by-step RFP process, go here.