With three pharmacy benefits managers dominating the nation's $200 billion in annual drug spending, the best way to choose the right one for your employees or health plan may just be a dart board-especially if you are as unenlightened about PBMs as the average consumer.
Poorly understood, PBMs are the shadowy middlemen who manage the prescription drug benefits for some 200 million people covered by a variety of private health plans. As business-to-business enterprises, they maintain a distant relationship with consumers and providers, earning their keep by negotiating prices with drug manufacturers and garnering rebates on large volume orders. They also develop drug formularies that steer patients to the most cost-effective drugs.
So how to pick one? First of all, get help, advises Gordon Vanscoy, assistant dean of managed care at the University of Pittsburgh School of Pharmacy and an executive consultant to the UPMC Health Plan. Vanscoy has made a business as a consultant to health plans to help them optimize the selection process of PBMs.
Other than getting the help of someone well-versed in the industry, Vans- coy lists four simple criteria for a health plan or an employer: pricing, access, data and sophistication.
Use common sense in pricing
The price should be competitive but make sure the PBM is stable and can meet its financial obligations, Vanscoy says. Don't rule out smaller regional players that can offer advantages over the big guys, such as direct access to patient data to support ancillary programs, he says.
To ensure adequate access for employees and subscribers, make sure that the PBM offers a high-quality mail-order service, access to a good network of retail drugstores and good availability of specialty drugs-the highest-quality medications. High-quality drugs may be more expensive, but a smart PBM realizes that in the long run, those expensive drugs can cut the overall cost of healthcare and improve the patient's quality of life, Vanscoy says.
Data give you information to determine that your employees are being served and whether the PBM is delivering on its promises, Vanscoy says.
"If the PBM offers a diabetes-control program, how can you be certain it is actually delivering?" Vanscoy says. "That goes to its ability to provide access to data and flexibility so you can actually mine that data," he says.
By "sophistication," Vanscoy says, it's important to look at how the PBM provides its services. Is it merely providing drugs or does it also offer pharmaceutical care? What is the procedure for doctors entering prescriptions?
"Many times sophistication is defined by the client, but the client has to be an informed group to understand what it can get from a PBM in addition to what it should cost," Vanscoy says. The best way to get informed is to invite a variety of PBMs to come in to make presentations and then compare and contrast what they say, he says.
Success depends on transparency, a timely topic for PBMs that are under fire by consumer groups for not always disclosing their relationships with pharmaceutical companies, Vanscoy says. A good PBM will first design its drug formulary based on the merits of the drugs, then discuss rebate agreements with drug manufacturers, he says. PBMs should be willing to disclose all their relationships upfront.
Transparency is the most important difference between good and bad PBMs, says Jack McClurg, chief executive officer of HealthTrans, a pharmacy benefit administrator based in Greenwood Village, Colo.
HealthTrans clients include employers, managed-care organizations, retail pharmacy groups and even a couple of PBMs. HealthTrans calls itself an administrator rather than a manager to distinguish itself as a pharmacy benefits service provider that fully discloses all of its revenue streams to customers.
No pharmacy benefit service is free, no matter what a prospective PBM might say, McClurg says. In addition, "make sure you understand where the financial incentives are for your PBM. The rest of the things fall from these two premises," he says.
Drug prices can rise if PBMs are motivated to steer patients to certain drugs because of the rebates they will get for them, McClurg cautions. Also, be on the lookout for "spread pricing"-the difference between what the PBM pays the pharmacy for the drug and what it will charge the client. Spread-pricing and rebates in themselves are not bad things so long as everyone clearly knows what they are, he says.
Once those practices are out in the open, then it's up to the employer or health plan to do the appropriate due diligence, McClurg says. It's good to know how frequently the PBM pays its network pharmacies.
"Twice a month is a typical payment cycle," he says. Once the playing field is leveled, it's just a matter of choosing the PBM that offers the lowest premium and the best service.
"The problem in this industry is we are talking about healthcare," McClurg says. "If we were talking about brake shoes, it would be OK to derive revenue from places the customer doesn't know about."
* Look for flexibility in benefit designs. The best pharmacy benefit partner is one that can help you design a plan unique to your members' needs.
* Expect transparency in cost streams.
* Look for evidenced-based formulary management. Make certain the drug recommended for your formulary will be chosen for its clinical performance, not the size of the manufacturer's rebates.
* Customer service should be aligned with your values. What level of customer service is part of the package and what is offered for additional fees? Does the PBM support member services such as enrollment, eligibility or member communications?
* Look for positive pharmacy network relationships. Does your PBM have positive, strong relationships with its pharmacy network?
Source: Jack McClurg, CEO of HealthTrans