Pharmacy benefits procurement helps plan sponsors and benefits brokers secure the right Pharmacy Benefit Manager (PBM), manage pharmacy spend, and negotiate lower prices and more favorable contract terms.
Healthcare costs in the U.S. continue to rise, driven in large part by pharmacy spend and the increasing cost of specialty medications. In 2023, prescription drug spend increased by 11.4%, totaling $450 billion – much of which can be attributed to a rise in specialty drugs and GLP-1s. Unlike many other areas of healthcare, pharmacy benefits are unique in that they can be negotiated on a per-unit cost basis, making PBM procurement a powerful lever for controlling overall healthcare spend.
Despite its importance, the pharmacy procurement process can be time-consuming, and difficult to navigate. In this article, we break down the pharmacy procurement process, common pitfalls to avoid, and what a more strategic, transparent approach to selecting the right PBM partner looks like.
What is Pharmacy Procurement?
Pharmacy procurement is the process by which plan sponsors and brokers evaluate PBM options and negotiate pharmacy contract terms. It typically involves comparing renewal offers against bids or offers from multiple PBMs to determine which one best aligns with the organization’s needs, cost goals, and member experience expectations.
Typically, a robust procurement process uses the employer’s actual claims data to model potential contract performance across different bidders. This allows organizations to compare not just discount guarantees and rebates, but the real-world, projected cost of the contract, before making a decision.
Done well, procurement ensures fiduciary compliance, creates accountability in vendor selection, and helps plan sponsors secure a contract that is cost-effective, transparent, and optimized for their population.
Common Challenges in Pharmacy Procurement
Employers trying to compare multiple contract offers manually (in spreadsheets) face a difficult and complex process, as evaluating PBM proposals isn’t as simple as comparing prices.
Manual and Complex Analysis
Every contract contains hundreds of variables—from rebate credits to specialty guarantees to exclusions—that impact cost and plan performance. Without deep contract expertise, it’s nearly impossible to review separate PBM bids in a way that compares the different terms apples-to-apples.
Many plan sponsors and benefits consultants can struggle to determine which pharmacy terms carry the most weight and how different PBMs apply those terms in practice. This lack of clarity can result in suboptimal selections or missed opportunities for savings.
Identifying and Comparing PBMs
While there are over 70 PBMs in the U.S., three dominate more than 80% of the market share. As a result, many plan sponsors default to analyzing just a few large PBMs when conducting a PBM RFP.
This can overlook alternative and potentially more cost-effective vendors, including regional or transparent PBMs, rebate aggregators, specialty carve-out solutions, and alternative funding programs. Some employers may also evaluate coalitions or TPAs, but doing so effectively requires a way to assess plan-level performance, not just group-level averages.
Without tools that can source more pharmacy benefit providers and support side by side comparisons, employers may miss opportunities that are better suited to their population and cost goals.
Lack of Contract Transparency
PBM contracts are often highly technical and use proprietary definitions that can make it difficult for employers to clearly evaluate cost and performance. Pricing terms such as rebates, exclusions, or drug categorizations may vary from PBM to PBM, and those differences can have a significant impact on a plan’s financial outcomes.
Additionally, contract terms can change over time, making it challenging to assess how current language compares to prior agreements. Without clear benchmarking tools or a structured oversight process in place, many employers don’t have full visibility into whether their contract is being administered as intended—or where there may be opportunities for improvement.
How to Optimize PBM Procurement
Pharmacy procurement doesn’t need to be difficult. Here are a few best practices that can help ensure a more strategic, cost-effective process:
- Be Proactive & Start Early: Timing is everything. Optimized procurement processes often take several months and involve multiple bid rounds and negotiations. Starting the process at least 9-12 months before contract renewal ensures ample time to review options, negotiate stronger terms, and avoid the pitfalls of a rushed decision. The most significant PBM procurement savings occur when the procurement begins early enough to influence implementation timelines and plan design discussions.
- Partner With Independent Pharmacy Experts: Some procurement partners may be financially tied to specific PBMs or coalitions, limiting the objectivity of their recommendations. Choosing an independent, technology-enabled, and fully transparent partner ensures that every PBM and vendor is evaluated on a level playing field, using your plan’s data and goals as the benchmark – not someone else’s incentives. Independence also helps uphold fiduciary responsibilities by demonstrating that all available options were considered and evaluated fairly.
- Leverage Your Data Strategically– One of the most important components of effective procurement is modeling each contract using your own claims data. This allows for accurate projections of net cost, reveals which contract terms will have the greatest impact, and helps surface optimization opportunities specific to your plan. It also enables smarter benchmarking, so you know how your plan compares to others and where you may be overspending.
The Truveris Approach to PBM Procurement
At Truveris, we combine data, technology, and industry expertise to deliver a better way to procure pharmacy contracts. Through our transparent and customizable Truveris Marketplace, we enable plan sponsors to evaluate over 60 PBMs and pharmacy vendors across more than 400 contract terms. Every bid is modeled using the plan’s actual data, allowing you to compare normalized costs and terms across all bidders. On average, Truveris clients see 20% cost improvement on their pharmacy contract when partnering with us.
Contact Truveris pharmacy contract experts today to learn how Truveris Marketplace and our pharmacy experts can transform your pharmacy program.
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.
