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  • January 2020
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Part II: Picking the Right Pharmacy Benefit Manager Can Lower Prescription Drug Costs

  • ​​Barbara Tomlin
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In Brief
Is your pharmacy benefit manager keeping the best interests of the plan’s members in mind? RGA’s Barbara Tomlin discusses how to identify whether a PBM is performing in Employee Benefit Advisor.

Having a quality PBM in place is half the battle. Making sure the PBM performs as needed is essential. Both federal and state governments are currently working on ways to rein in spiraling drug costs, but for now, knowledge and information are key.

There are three contract models PBMs use: traditional, transparent pass-through and hybrid (a blend of traditional and transparent). Traditional contracts utilize several factors: 

  • Spread (or network) pricing: The difference between what the PBM pays the pharmacy and bills the client, calculated either per-script or per employee per month.
  • Generic Dispensing Rate (GDR): This metric refers to the percentage of generic drug fills divided by the total number of prescriptions. The GDR is an important metric, as it shows a commitment to producing lower prescription drug costs.
  • Clawbacks: These occur when insured patients’ copays are higher than the cost of the drug to the insurer or PBM.
  • Audits: PBMs sometimes impose strict audit practices that penalize pharmacies for minor errors that pose no consequence to a claims, forcing the pharmacies to forgo reimbursement from the PBM. 

Transparent/Pass-Through contracts fully disclose arrangements with pharmacy networks and all rebates tied to claims utilization are passed on in full. Additionally, there is no spread pricing. The PBM charges the client what it pays the pharmacy for a drug.

Hybrid contracts blend aspects of transparent and traditional pricing arrangements. There is no one specific type, as some are full-service contracts and others permit the plan to choose which services they want.

It is important for plan sponsors to carefully review the language in a PBM contract. Consider these factors when choosing a contract that would be most beneficial:

  • General: When selecting and managing a PBM contract, plan sponsors should compare bidding PBMs by using all-in drug costs, net of rebates and all PBM fees to make an apples-to-apples comparison. Additionally, use a PBM expert to help assess whether the PBM is a good fit with your company, is aligned well to help meet goals and objectives for member satisfaction and to negotiate the contract.
  • Financial: It’s important to assess if integration of medical spend data and pharmacy spend data are feasible with your current arrangement and if the PBM is transparent about costs. Additionally, the insurer should be able to conduct audits of the PBM and understand how expenses, fees and profits will be reported.
  • Administrative: Know what contract model will work best and the minimum length of time the PBM requires for its contracts. Assess how the PBM defines brand-name drugs and generic drugs and confirm the definition of “specialty pharmacy” in your company’s plan language matches the PBM.
  • Services: Ask about services for specialty clinical programs and specialty drug availability under the PBM. If unavailable in the PBM’s network, it’s important to know if specialty drugs can be secured outside of the network and if the PBM will provide patient assistance to secure funding for specialty drugs via the manufacturer’s assistance program and what fees that will entail. 

Additionally, use data from pharmacy and medical claims, as well as proven technology to gain insights into your current pharmacy program to best optimize the PMB. Use reputable experts and consultants to assist you in formulating your plan to optimize the program over time. Gaining as much knowledge and information as possible about what is being paid for and what drugs are covered is the key to a good PMB match. 

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Meet the Authors & Experts

Barb Tomlin
​​Barbara Tomlin
Director (Ret.), ROSE Consulting Group, Quota Share


Curious? Contact us to discuss pharmacy and medical claims cost management. 
Reprinted with permission of Employee Benefit Advisor,