5 Tips to Reduce Prescription Drug Costs and Get the Most from Your PBM
Prescription drug prices climb higher with each passing year and are a major factor in the increasing cost of healthcare overall. On average, a prescription drug plan accounts for about 20% of an employer’s total healthcare expenses. Thus, prescriptions should be a major focus for any employer who is serious about lowering their overall healthcare expenditure.
One of the best ways to do this is by hiring a pharmacy benefits manager, or PBM. A PBM will contract with a health plan and oversee that plan’s pharmacy benefits. Specifically, a PBM may design the plan’s formulary (i.e., deciding which prescription drugs the plan will cover), set up the plan’s pharmacy network, establish copays for prescriptions, and pay claims. The fact that the PBM controls which drugs are and are not included under the plan gives them a significant amount of bargaining power with pharmaceutical companies, which they can use to negotiate rebates.
However, there has been a lot of concern recently over whether a pharmacy benefits manager’s interests truly align with those of employers. The process by which PBMs profit is not always clear. Additionally, while a portion of the rebates are passed on to you, the PBM also gets a cut, and the fact that the rebate is a set percentage of the drug’s total cost means that PBMs earn more money for including more expensive medications in their formularies.
How can you ensure that your company is getting the best possible deals with its prescription drug plan? What steps can you take to make sure your PBM is truly on your side? Here are five points to keep in mind.
- Work with a fiduciary PBM
Unlike standard PBMs, fiduciary PBMs work under a pay-for-performance model, profiting exclusively from fully disclosed administration fees. They do not receive a cut of rebates negotiated with big pharmaceutical companies, and thus do not have an incentive to favor high-cost drugs. This approach reduces much of the conflict of interest seen in the traditional PBM model, promoting transparency and encouraging the PBM to work towards the best possible outcomes for your employees’ health and your company’s finances.
- Eliminate needless costs
One of the biggest factors that separates a trustworthy PBM from a self-serving one is how much emphasis they put on needlessly expensive drugs. These include brand-name drugs that are equally effective as their generic counterparts, prescription versions of medications available over-the-counter, combined versions of drugs that are much cheaper when purchased separately, and so on. More expensive drugs do yield larger rebates, but the cut of those rebates that your company receives will still fall short of the amount you could save by sticking to low-cost, generic drugs. Researchers estimate that cutting back on overly-expensive prescriptions could reduce your overall pharmacy expenses by as much as 24%.
- Conduct clinical reviews
One of the best ways of identifying the needlessly expensive drugs highlighted in the previous section is through a clinical review. Here, a consulting clinician looks over pharmacy claims files and utilization data to see which medications are being filled, and whether any of this is unnecessary. A review like this can help you see which drugs your employees are overpaying for and whether expensive brand-name or specialty drugs are being needlessly prescribed. After the review is complete, the clinician will sit down with you and discuss the results and whether changes need to be made to your plan’s formulary.
- Employ step therapy
Another way to cut back on unnecessary prescriptions of expensive drugs is through step therapy. This model requires doctors to prescribe relatively low-cost medication initially, only jumping to a more expensive option if the first prescription does not produce the desired result. Because many expensive drugs are just as effective as their cheaper, generic cousins, your employees will still be getting the treatment they need, and you will be cutting back on needless expenses in the process.
- Make sure you are prioritizing the right things when assessing your PBM’s performance
As with anything your business does, you will want to know whether your partnership with your PBM is producing good results. Thus, it is important to consider how you will assess their performance. Traditional PBMs typically measure their own success by the number and size of the rebates they receive or by the amount of orders they fill. However, this can create incentives that are at odds with your own goals. Rather than focusing on metrics like these, consider how successful your PBM has been in lowering your overall healthcare expenses. This is another place where fiduciary PBMs really shine, as they are rewarded for doing exactly this.
Partnering with a pharmacy benefits manager is a great way to bring your prescription drug costs – and thus, your overall healthcare expenses – under control. However, it is important to make sure that your PBM is truly on your side and is doing the most that they possibly can to ensure that your employees and your company’s finances are happy and healthy. If you are considering partnering with a PBM, be sure to look for one that follows the fiduciary model, and focus on reducing unnecessary prescriptions of expensive medications wherever possible.