Increasingly, plan sponsors and payers are demanding more control and visibility over their pharmacy program. Even Congress has spent this summer crafting legislation to promote transparency in PBM practices.
But how do we define transparency? At a broad level, transparency refers to visibility into drug-spend components and their cost drivers. Within a pharmacy benefits contract, there are multiple elements that can influence transparency and effective decision-making: definitions and contract terms; performance guarantees; sources of price variance, and many more that combine to drive total drug spend.
Truveris experts reviewed five specific steps to increase visibility and control over your pharmacy program in a recent webinar, “Transparency in Pharmacy: Innovative Strategies to Drive Outcomes for Self-Funded Plans.” Highlights of their perspectives are captured in this article.
The current landscape demands transparency
It’s not hard to understand what’s behind calls for transparency. Specialty drugs account for only 2% of pharmacy claims but 55% of pharmacy spend an average around $84,000 annually per treatment. It’s much harder, however, to understand the factors driving these costs: beyond pricing and utilization, contractual terms governing limited-distribution drugs, offsets, and audits are among the myriad factors that influence spending.
To address these factors, the market has adapted in various ways. Some PBMs have adopted a “pass-through” model, replacing the spread with administrative fees. Plan sponsors are testing cost-containment strategies like accumulators, maximizers, and alternative funding models.
Then there are creative approaches to procurement, such as unbundling services and spreading them across vendors. “None of these options are good or bad, and none are miracle solutions,” said Sara Sherrod, Truveris’s Vice President of Marketplace Management at Truveris. “There are pros and cons to each, and it’s important to consider all available options before deciding which are the right fit for any particular plan.”
Act early and stay engaged: Five actionable steps to achieve transparency in your program
1. Timing. Start thinking about procurement at the beginning of the final year of your contract. What specific areas of the pharmacy benefit need improvement? Knowing this is critical for developing your pharmacy strategy and identifying vendors with the expertise to help.
Anthony Iannaci, Manager of Marketplace Management at Truveris, suggests putting out your RFP approximately 9 months in advance, which gives you time for multiple offers and rounds of edits. “The first offer is never the best. More time always results in a better outcome,” said Iannaci. Wait too long and you’ll wind up with a deal that’s not best suited to your needs.
2. Optionality. Evaluate different types of offers and vendors. Larger, full-service PBMs may offer attractive “headline rates” but provide the least visibility into how costs are allocated. Consider alternative types of partners (e.g., regional or pass-through PBMs, coalitions, or PBAs that enable you to unbundle your benefit) that are willing to focus on components of the benefit structure you value, such as flexibility in contract terms.
“Understanding the different levers you can pull across offers helps to break down the black box of full-service offers” and create a benefit structure that’s a good fit for you, said Sherrod.
3. Dynamic competition. You have already analyzed your pharmacy data for improvement opportunities. Now, emphasize these high-value priorities and put pressure on suitors to address them in a second round of bids. This is targeted competition, and the ability to inject it into your procurement process stems directly from a combination of timing and optionality.
At this point in the process, it’s crucial to ensure that your procurement and bid comparisons employ an objective, agnostic approach to avoid conflicts and arrive at the best option to suit the unique needs of the plan.
Here’s an example of how this can play out. Recently, a grocery and food distributor worked with Truveris to identify every option for optimizing its pharmacy benefit. The client started the process early and evaluated multiple offers from three full-service PBMs, its incumbent PBM, and a PBA that carved out specialty dispensing to a separate vendor.
Stressing the contractual aspects of these vendors’ proposals, the client was able to leverage greater savings in a second round of bidding. The percentages in the figure are savings relative to the client’s existing benefit plan.
4. Oversight. Don’t sit back once procurement is done – this is when things can become opaque. Engage an independent third-party to ensure that your contract is performing as expected after you procure a new plan. The reasons for missed guarantees aren’t easy to spot.
At Truveris, we have seen definitions altered, exclusions and lists redefined, and brands and generics adjudicated as each other throughout the life of a contract. Readjuducate all of your claims under the original contract definitions and terms to reveal errors and hold your supplier accountable.
5. Member engagement. Finally, give members transparency tools that empower them to make decisions that drive the outcomes you want. 66% of U.S. workers report wanting more education from employers about their benefits.
There are multiple tools on the market that help members gain transparency into their benefit and out-of-pocket costs. These tools also provide plans with actionable insights to guide discussions with a PBM about member behaviors.
Joe Thomas, PharmD, MPBA, Clinical Director at Truveris, reminded attendees that what’s true for the plan is also true for plan members: signing a contract isn’t the end of the process, but the beginning of a new one for them, too. “The end result almost always impacts a life downstream, so in my opinion it’s absolutely critical that a plan sponsor evaluates any change to the pharmacy benefit and engages in a transparent conversation with the PBM.”
Follow the essentials to achieve transparency
To have a fully transparent pharmacy program, plan your pharmacy strategy, have a competitive procurement process, and maintain ongoing efforts to oversee contract performance and member engagement.
Following these steps, you can make an informed decision about your pharmacy benefits partners and be confident about it throughout the life of your contract.