5 ways to improve PBM procurement for clients

Nearly a decade ago, plan sponsors' pharmacy benefit conversations focused mostly on member satisfaction and plan compliance. Today, fiduciary duty comes first, then member satisfaction, compliance and, of course, GLP-1s, which is why employers are counting on their benefit advisers more than ever to guide them through Rx matters. Times have changed, which begs the question, "What does it take to ensure plan sponsors meet their fiduciary duty?"  

Putting the pharmacy benefits manager (PBM) business "out to bid" every few years isn't enough. Given heightened scrutiny of traditional PBMs and rising Employee Retirement Income Security Act (ERISA) liability risk, plan sponsors should regularly evaluate their PBM options, prioritizing strategies that lower total costs, improve member outcomes and safeguard long-term plan sustainability. However, issuing, evaluating and managing requests for proposals (RFPs) from PBMs can be challenging. 

Read more:  Benefit managers face booming demand for GLP-1 benefits 

Drawing on my 30-plus years of experience in the pharmacy industry, including as a plan administrator, here are five considerations to help plan sponsors improve PBM procurement:

1. Start the RFP process early – and be specific   
Changing PBMs involves contract negotiations, claims data transfer, formulary alignment and employee communication. Allowing ample time for this process reduces risk and ensures a thorough evaluation. Plan sponsors should determine specific goals for a new PBM partner — enhanced service, improved pricing, better outcomes — and engage a pharmacy consultant or actuary to help develop and analyze proposals. 

Setting a definitive timeline is also important. Depending on plan size, sponsors should release PBM RFPs six to 12 months before their desired implementation date. They need to account for any scheduled open enrollment sessions, termination clauses in existing PBM contracts, and for those staying with their current vendor, any market check or audit provisions.

For a January 1 start date, consider this timeline:

2. Deprioritize member disruption as a decision factor
While minimizing member disruption is important, it shouldn't be the primary priority during PBM procurement. The purpose of a PBM RFP is to secure a partner that offers better cost control, transparency, service and contract terms. Over-prioritizing disruption increases the risk of misaligned priorities and may compromise key contractual issues like rebate guarantees or formulary control, which can have long-term negative effects on plan costs and member outcomes.

Plan sponsors should use data to analyze high-risk areas (such as specialty drugs) and allow for targeted mitigation strategies. They should leverage practical solutions like "grandfathering" or "continuation-of-therapy" programs to mitigate the risk of disruption and clearly communicate the rationale behind any changes to help members understand and accept short-term adjustments. 

Read more:  Benefit managers are prioritizing financial wellness support in 2025

3. Be wary of PBM coalition arrangements
Coalition arrangements often sacrifice customization for group-negotiated terms. They aren't inherently bad for plan sponsors and members, but they restrict flexibility and may not align with their specific needs. Coalitions also can lack transparency around fees and rebates, making it harder to evaluate cost savings. Much like a group purchasing organization, PBM coalitions often extract a portion of the contract value that should go to the plan's bottom line. 

4. Think beyond the spreadsheet 
Relying solely on spreadsheet analysis oversimplifies pharmacy benefit management and complicates PBM comparisons. Traditional spreadsheet evaluations emphasize direct costs — administrative fees, discounts and rebates — without considering drug mix, refill thresholds, long-term clinical outcomes, member health or overall cost of care. A PBM with higher upfront costs might deliver better results by reducing waste, optimizing care and improving member health, but these won't impact the spreadsheet. Neither will critical nuances like rebate transparency or specialty drug management. 

By going beyond the spreadsheet, plan sponsors can evaluate PBMs more comprehensively based on total cost of care, clinical efficacy and alignment with organizational goals to meet their fiduciary duty under ERISA and members' needs.

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5. Break the addiction to rebates
Dependence on rebates drives misaligned incentives in PBM contracts. Rebate models often benefit PBMs more than plan sponsors, inflating costs and incentivizing the use of high-cost brand drugs over generics or biosimilars. Members may face higher out-of-pocket costs because rebate savings aren't applied at the point of sale, deterring medication adherence and worsening health outcomes.

Plan sponsors can break this addiction by prioritizing better formulary and clinical management and incentivizing members to use lower-cost drugs through reduced co-pays, for example. This will align plan sponsors with industry trends favoring transparency and cost management – a shift that will be accelerated by the ripple effects of the Inflation Reduction Act on commercial plans. 

Plan sponsors may feel more comfortable staying with their current PBM, but to quote Brené Brown, "Choose courage over comfort." After all, if the incumbent offers larger rebates or better pricing during the procurement process, why couldn't they do it during the current contract term? Larger PBMs may appear to have an edge on the spreadsheet and promise significant savings, but that doesn't usually materialize for plan sponsors. 

Members are waking up to their rights and becoming more savvy prescription drug shoppers. By following these guidelines, plan sponsors can do the same during PBM procurement.