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July 16, 2021
Once upon a time, pharmacy benefit managers (PBMs) were born. They grew up from something called “claims processing” or claims adjudication platforms. Believe it or not, pharmacists billed prescriptions by hand – without computers.
When the claims processors grew up, along with the internet and satellites and the ability to process claims rapidly, the claims processing for pharmacy and prescriptions sped up to real-time billing. Today, when you go to your pharmacy with a new prescription it’s billed to your insurance company (assuming you have and use your insurance company) real-time, and before you leave with your prescription. (As an aside, medical claims billing still does not work this fast to this day.)
As the claims processors grew, they became more sophisticated and added more services such as clinical reviews of prescriptions (called prior authorization and/or drug utilization reviews), integration of deductibles and out-of-pocket fees with medical carriers, collecting and sharing claims data, building networks of pharmacies, and even started call centers for helping members. Today, PBMs provide dozens of services to clients.
I was asked by one of our 60+ PBM partners recently what the “perfect” PBM might look like, and I thought it was a very interesting question.
As a pharmacist, I might say that the perfect PBM does not exist, because no PBM might be perfection. However, that is unrealistic knowing that there are more than 20,000 prescription drugs on the market at any one time, more than 65,000 retail pharmacies out there in the US, and claims varying in price from $1 to $2.125 million per claim. There needs to be some oversight.
Perfection may be a struggle in the realm of PBMs, but Apex – albeit agnostic when it comes to PBMs – likes to see the following from an ideal PBM partner on behalf of our clients:
- The PBMs abide by the law – They operate within the boundaries of state and federal law. This might be a no-brainer, but it is worth stating in writing.
- The PBMs provide on time, clear, consistent, detailed RFP responses – While I admit, most broker/advisors probably do not request the amount of detail that we do on pharmacy RFPs as we do at Apex, there is nothing better than receiving clear, consistent, detailed analyses as requested in the RFP back from potential PBM vendors. It is frustrating to waste time constantly trying to get a complete bid from PBMs. We need a complete picture of the offering from the PBMs we invite to bid, and when we give consistent feedback on what is good (and not so good) about PBM RFP responses, we appreciate when PBMs pay attention and continue process improvement.
- PBMs provide fully transparent, 100% pass through contracting – this means a few things:
- That the PBM is only making revenue that is clearly outlined in the four corners of the PBM contract,
- All rebates are being passed back through the client at 100%,
- The PBM is willing to guarantee discounts in the contract,
- The PBM is still willing to guarantee some rebate minimums in the contract (even if they are passing them back at 100%)
- The PBM is willing to put in writing they are a fiduciary for the Plan.
- The PBM is not making money through spread (by charging a Plan something more than what they’re paying back to the pharmacy.)
- PBMs are willing to update their contract terms on a frequent basis, proactively – Three years is a lifetime term for a PBM contract these days. Thus, the PBMs who are willing to sign a 1-year deal are more favorable, simply because the PBM and pharmacy scene is changing so quickly. Those who are flexible will continue to win in the years to come.
- PBMs charge fair and reasonable administrative fees – There are several ways PBMs can charge for their services. If it is a reasonable administrative fee — either on a claim or member basis and/or for specialty savings programs, without a bunch of hidden revenue streams missing or hidden inside language of the PBM contract, there is absolutely no problem with the PBM making money. However, some of the PBM admin fees aren’t reasonable — and sometimes, there are fees going to others than the PBM itself in those admin fees.*
- The PBMs reimburse pharmacies fairly – As a pharmacist, I’m keeping my eyes on how the PBMs treat pharmacies too, because DIR Fees and claw backs are also a problem. The ideal PBM will treat pharmacies fairly, and not go back and take back huge fees and claw backs for no reason, other than they must make more revenue. A good PBM is going to do its due diligence at the time of the claim being processed – not six months from now. Also, the PBM isn’t pocketing spread either. What they pay the pharmacy is what they charge the client, period.
- PBMs provide rapid customer service – This also means different things to different people but having a variety of ways to connect with members is important. That might mean a great smartphone app or texting for prescriptions, or free mail order delivery, or not waiting on hold for 30 minutes to talk to a human when there’s a prior authorization on a specialty drug, or a problem at the pharmacy. The PBM should be easy to work with both on the member side, and on the pharmacy side.
I know and appreciate that PBMs often get a bad rap, and not everyone in pharmacy sees their value. However, I am a pharmacist who sees both points of view. There should be someone overseeing pharmacy claims, but at the same time, playing fairly with all the players including the payers and the patients. Not all 60 of the PBMs we work with are perfect, but many of the better PBMs operate within our wishlist above.
If you’re not sure you have a better PBM – reach out to us. We have a good handle on who is far away, and closer to….perfection.
*Apex Benefits does not take money from PBMs.
Read more insight from Erin on other pharmacy related topics.