3 PBM programs and capabilities to consider beyond unit cost

Drug pricing is typically the main factor brokers and employer groups consider when evaluating pharmacy benefit managers (PBMs). It makes sense. In a highly complex marketplace, their primary focus is getting their members' prescriptions filled for the lowest price. 

But projecting — and ultimately lowering — total drug spend is about more than discounts, dispensing fees and rebates. The clinical value a PBM can provide also plays a critical role in identifying savings. This means that a PBM that is seemingly more expensive at the outset may reveal more significant savings due to the clinical benefits it delivers. Here are three major factors brokers and employer groups should consider beyond unit cost when choosing a PBM.  

Formulary options
While pricing often takes center stage in the PBM selection process, brokers and their clients shouldn't overlook the importance of formulary considerations. Is the employer going with an off-the-shelf formulary or investing in a custom formulary? Does the PBM's formulary include a good mix of brand-name drugs and lower-cost generics? 

Read more: How this company is guaranteeing the lowest drug prices

Despite the availability of clinically equivalent branded and lower-cost products, many PBM formularies favor branded products due to their rebate value, yet generics often result in lower overall costs for plan sponsors. It's also important to ask if your client's PBM has its own pharmacy and therapeutics committee, clinical staff that manages a formulary and can safely steer patients to the most appropriate and cost-effective drugs.

Policy strength
When selecting a PBM, it's important to understand how policies are developed and how strictly they are enforced. Examples include prerequisites for drug approval, the severity of approval criteria and acceptance or rejection rates for key medication classes. 

Consider the drug Duexis. It's a combination of ibuprofen and famotidine — two low-cost over-the-counter drugs — yet it's priced at thousands of dollars. You don't want that approved. But it still sounds bad to deny someone a drug that a provider suggested they take, right? 

Read more: The quest to enhance PBM transparency and accountability

Usually, it's as simple as buying two over-the-counter products, taking the medication twice a day instead of once, taking the generic, or trying a lower-cost product before the more expensive option is approved. 

The ability of a PBM to prioritize lower-cost options is invaluable. In a world where yearly medication costs can exceed $100,000 for one drug, a PBM might be tempted to approve such a drug to maximize rebates. A wiser strategy would involve initially denying the expensive option and requiring the patient to try a more affordable drug costing, say, $10,000 per year. 

Even with high rebate percentages, a more expensive drug can still lead to net losses when compared to a cost-effective alternative, which does not offer rebates. It's also worth noting that depending on the group's contract, many don't receive the full value of rebates. In addition, employer groups may benefit from outsourcing their utilization management away from the PBM and to an independent entity, maintaining clear criteria for formulary construction and rigorous adherence to prior-authorization policies.

Read more: Blue Shield of California dropped CVS as its PBM — why it could save them $500 million

Clinical savings guarantees 
So often in healthcare, the patient and employer bear all the risk. PBMs promise competitive pricing, and some have begun to back these claims with clinical guarantees. 

These guarantees are implemented in various ways, with one common method being a set total dollar risk. For example, if a group incurs $3 million in expenses, the PBM might pledge a clinical savings guarantee of $300,000, promising to save that amount via clinical programs.

Another approach is a per-member-per-month (PMPM) guarantee. Here, the PBM assures that the group's PMPM expenses will not exceed a certain limit, staking their administrative fee against this promise.

Guarantees also can be tied to specific programs. For instance, with physician detailing — where the PBM collaborates with providers to switch members from costly to more affordable medicines — an additional $1.75 might be added to the PMPM. The PBM can guarantee equivalent savings, ensuring the group doesn't risk financial loss.

Ultimately, the PBM's pricing tells, at most, half the story of the pharmacy cost you can expect for your group based on working with that PBM. Yet historically, the majority of groups and brokers compare PBMs purely based on financials. Leaving clinical programs to chance usually ends up leaving money on the table. 

Looking to the future, it's crucial to consider the evolving dynamics of the pharmaceutical landscape. With the FDA pipeline dominated by specialty drugs and the impending arrival of novel therapies, pharmacy costs will continue to surge. The focus on unit cost, while significant, fails to fully address the evolving complexity. 

Brokers need to expand their scope to find PBMs that meet their clients' budgets and needs. They need to dive deeper, considering formulary design, policy strength and clinical guarantees, but also evaluating the PBM's ability to navigate the torrent of new and expensive drugs on the horizon. This partner should not only deliver cost-effectiveness but also adaptability and foresight, understanding the intricacies of the rapidly evolving pharmaceutical market.