Tuesday, October 31, 2017

Only 30% of Employers Get Pharmacy Benefit Manager Contracts

According to the National Pharmaceutical Council, only 30 percent of employers have a complete understanding of their pharmacy benefit manager (PBM) contracts. Based upon my experience, the percentage of employers who have a complete understanding of PBM contracts is far lower than 30 percent.
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I can't stress enough how important it is that anyone involved in the procurement of PBM services be an expert in the industry. The stakes are far too high for your team to be comprised of folks who "pick it up as they go." Take a look at what Michael Critelli, former CEO Pitney Bowes, wrote to me recently.

"Tyrone I am pleased that you wrote the particular essay I downloaded. Many corporate benefits departments do not understand that they are overmatched in negotiating with pharmacy benefit managers, as are the "independent consultants" who routinely advise them. The first step in being wise and insightful is admitting what we do not know, and you have humbled anyone who touches this field."  

Employers want to provide the best health benefits for their employees while getting strong value in return for the money they spend on prescription drug benefits which requires self-assessment. Still not convinced you might be overmatched? Take my 3-minute PBM IQ assessment to determine your level of PBM sophistication.

Just 40 percent of the 88 employers participating in the survey said they understand the performance guarantees included in their PBM contracts, while 63 percent added that PBMs are not transparent enough about the financial workings of these arrangements.

Fifty-eight percent of employers also believe that contracts are too complex, ambiguously worded, and often benefit PBMs at the expense of employers. In addition, 50 percent of employers surveyed think PBMs lack transparency about the basis for those decisions regarding formulary and exclusionary list decisions, such as the clinical, financial and economic impacts of contracts

“The problem faced by most employers is that, while they are concerned about a lack of transparency, they are confused and intimidated by the sheer complexity of the prevailing PBM models and ambiguously worded contracts that are common,” NPC added.

According to URAC, PBMs will provide transparency and disclosure to a level demanded by the competitive market and generally rely on the demands of prospective clients for disclosure in negotiating their contracts. The best proponent of transparency is informed and sophisticated purchasers of PBM services. Assessing transparency is more effectively done by a trained eye with personal knowledge of the purchaser’s benefit and disclosure goals.

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