Tuesday, June 2, 2020

Tuesday Tip of the Week: Large non-fiduciary PBMs hire members of the Big Four consulting firms to help them identify ways to generate hidden cash flows

Take this to the bank as it is neither hyperbole nor conjecture. Large non-fiduciary PBMs hire members of the Big Four consulting firms to help them identify ways to generate hidden cash flows which can lead to plan sponsors overpaying for PBM services. Those consulting firms include PricewaterhouseCoopers (PwC), Ernst & Young (EY), Deloitte & Touche, and KPMG.

Source: Wikipedia

I can't imagine being a MBA just out of Harvard Business School working for one of these firms and learning about all the tools PBMs have at their disposal to generate hidden cash flow. What it feels like when they ask, "you mean to tell me your clients don't know about this? or What about this?" and the PBMs response is no they don't. It must feel like the first time a 5 year old boy or girl walks into Check E. Cheese.

The problem with hidden cash flow is that it contributes to wasteful spending and ultimately ends up in the Final Cost to the Plan. I can't stress enough how important it is that anyone involved in the procurement or oversight of PBM services be sophisticated. 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 a few years back.

"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 their healthcare dollars. If you're not sure where you stand in your PBM education, take this self-assessment. Education is the great equalizer in the PBM space as it is in life.

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