How Employers and Pharmacy Benefit Managers Can Work Together to Cut Costs

Despite all that PBMs do to reduce costs and improve the quality of pharmacy benefits, it is important to understand that employers, unions and government programs are in the driver’s seat.

Employers in today’s healthcare market face the difficult challenge of balancing access to innovative, life-saving and preventative medicines for consumers, while keeping costs at a sustainable level.

Over the past 20 years, as these new treatments have entered the market, creating a dilemma of cost and access, those who provide coverage (employers, unions and government programs) have realized the value of hiring Pharmacy Benefit Managers (PBMs) to meet the healthcare needs of their respective members.
PBMs reduce prescription drug costs by promoting generics and negotiating rebates and rebates with drug manufacturers to reduce the net cost of the drug, creating lower cost pharmacy options. This model has reduced drug costs for employers in the commercial market and is the basis of the popular and successful Medicare prescription drug benefit.

Today, specialty drugs dominate the amount spent on pharmacy benefits, and payers are demanding PBM contracts that save money while ensuring these drugs are accessible and delivered safely. PBMs typically provide guarantees to customers to support accuracy rates through specialty and mail-order pharmacies, which are better than retail pharmacy accuracy rates. This delivery option can improve patient compliance, improve patient health and reduce overall costs.
But despite all that PBMs are doing to reduce costs and improve the quality of drug benefits, it is important to understand that employers, unions and government programs are in the driver’s seat. Ultimately, these payers design the benefits, create the formularies, decide the levels of transparency around discounts and rebates that PBMs negotiate with drugmakers, and the amount of reimbursements they choose to keep. After all, it is those providing the coverage who best understand the unique set of members, as well as their own financial situation.

I know firsthand how the procurement process involves a very rigorous process that involves financial value as well as operational acumen, levels of transparency, audit rights, the ability to provide pharmacy choice and patient satisfaction, capabilities to reduce fraud, waste and abuse, and improve patient care through specialty pharmacies and mail order.

PBM’s clients use a “request for proposals” (RFP) process and often engage expert benefits consulting firms to provide assistance. These benefits consulting firms are nationwide leading entities that use high-tech resources to evaluate PBM services for clients. This bidding process ensures that every PBM customer receives the services they need and want.

Ultimately, the system works for employers. A multitude of PBMs are lining up to provide these types of services to customers. In my experience, if the customer wants something, it is provided; otherwise, a competitor of PBM will step in to provide it, it’s as simple as that.