PBM Guarantees in Pharmacy Benefits

Within pharmacy benefits contracts, PBM guarantees serve as a safeguard to ensure plan performance, but their effectiveness depends on how they are written, managed, and enforced. This blog reviews the basics of pharmacy contract guarantee terms, highlights where they can lose value, and shares steps employers can take to keep PBM guarantees working in their favor.

What are PBM guarantees in pharmacy benefits contracts?

Guarantee terms set minimum expectations for how a PBM will perform on important pharmacy plan metrics, such as pricing discounts and rebates. Without them, employers have no clear reference point for PBM accountability.

PBM guarantees can take several forms:

• Pricing guarantees: These include discount guarantees (average price reductions the industry benchmark price known as AWP), dispensing fee guarantees, and rebate guarantees.
• Trend guarantees: Commitments that overall drug costs won’t increase beyond a certain rate.
• ROI guarantees: Commitments to specific performance-based financial metrics tied to clinical programs or savings initiatives.
• Performance guarantees: Service-level agreements that hold PBMs accountable for accuracy, call center responsiveness, or reporting timeliness, often with dollars at risk.

Employers should also pay attention to or ask their benefits consultant about the level of the guarantee:

• Client-level guarantees tie performance to the employer’s actual membership.
• Book-of-business guarantees may pool results across multiple employers or a consultant’s book of business, which can impact accountability.

Market trends in guarantees

Across thousands of PBM procurements and monitored contracts, Truveris has observed meaningful shifts in how PBM guarantees are evolving:

Pricing Guarantees

• In non-specialty categories, discount levels have largely plateaued over the past few years.
• Specialty categories, however, continue to see a shift in their guarantees, with a 10% increase over the past 5 years.
• At the same time, PBMs are increasingly carving out subcategories (such as “limited distribution drugs”), which come with less favorable guarantees.

Rebate Guarantees

• Minimum rebate guarantees have grown substantially, in some cases doubling over the past five years.
• Increased rebates may seem appealing, but exclusions, list changes, and credit mechanisms can significantly reduce the realized value of these guarantees.

For employers, the takeaway is clear: guarantees may look strong on paper, but the surrounding contract language must be examined and clearly defined to understand how much value may actually be delivered or when a conversation with your PBM is needed.

Five ways PBM guarantees can lose value

Even strong-looking guarantees can be weakened or diluted by certain kinds of contract terms. Employers should watch for these five scenarios:

1. Definitions and offsetting
   • How a PBM defines “brand,” “generic,” or “specialty” drugs can shift claims between buckets, affecting whether a guarantee is met.
   • Offsetting provisions let PBMs use overperformance in one area to cancel out underperformance in another, potentially leaving employers with no recovery, even when guarantees are missed.
2. List changes
   • PBMs often reserve the right to change specialty lists, formularies, or MAC lists during the contract.
   • Midyear reclassifications can move drugs out of categories with higher guarantees, shifting expected savings amounts.
3. Rebate credits
   • With biosimilars and price reductions on drugs like insulin, PBMs have introduced “rebate credits.” These reduce rebate payouts when list prices fall, offsetting what otherwise would be owed under rebate guarantees.
4. Carve-out programs
   • Carving out GLP-1s or low-cost generics to third-party programs can be clinically appropriate, but PBMs may respond by renegotiating discounts or reducing guarantees.
   • These adjustments can potentially be found in exclusivity clauses in the contract.
5. Performance guarantees
   • Performance guarantees are one valuable lever employers can use to hold PBMs accountable for service.
   • Employers can allocate penalty dollars to the areas most important to member experience, such as call center response times or claims accuracy.

Managing PBM guarantees across the contract lifecycle

Pharmacy contract guarantees are only effective when monitored consistently. Employers should take a full lifecycle approach:

PBM Procurement: During the RFP process, push for client-level guarantees, clear definitions, and competitive rates. We recommend aiming to avoid broad offsetting provisions.

Implementation: Ensure your negotiated terms make it into the final PBM contract, and confirm definitions, exclusions, and list references are documented.

Ongoing PBM oversight: Closely monitor PBM performance during the contract year. For an optimal approach, track and reprice every claim against the PBM contract terms. Watch for list or formulary changes and assess their financial impact.

Audits and market checks: Ensure your contract includes language that allows for audits that, if needed, can help verify compliance and recover missed payments. We also recommend retaining the right to market checks so guarantees remain competitive over time.

Key takeaways for managing guarantees in pharmacy benefits

Guarantees are an essential safeguard in PBM contracts, but they are only as strong as the language that defines them.

Employers should take an active role in negotiating, implementing, and monitoring guarantees to preserve their value. For more information or questions about terms in your pharmacy benefits contract, contact a Truveris contract expert today.

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Truveris is a leading digital health company focused on delivering truth and clarity in pharmacy. Truveris’ proprietary technology, coupled with deep pharmacy expertise, helps to build a more efficient market that maximizes choice, accessibility, and prescription drug affordability. Our solutions provide the insight and knowledge to help people lead healthier and more productive lives.