How to Drive Transparency in Pharmacy Benefit Contracts

The topic of transparency in pharmacy pricing is frequently covered in national news. State and federal legislators are actively discussing how to achieve pharmacy transparency and scrutinizing PBM practices. Simultaneously, employers are eager to understand what goes into their pharmacy spend and how to control it.

A recent Truveris webinar, “Transparency in Pharmacy: Key Metrics to Drive Contract Performance,” discussed strategies for achieving transparency in pharmacy contracts.

First and foremost, what’s behind the push for transparency? Increased price pressure on pharmacy benefits. List prices of specialty pharmaceuticals are increasing at approximately twice the rate of all brand-name drugs. In response, PBMs are implementing more restrictions on these types of medications to protect their profitability, often extending some of the cost of these drugs over to the plans and members.

So how is transparency the solution? In pharmacy, transparency has many definitions and contexts.

“At Truveris, we define transparency as having visibility into discrete components and cost drivers of the pharmacy program,” says Louise Shea, RPh, Truveris’ Senior Vice President of Product Strategy. “A truly transparent program is defined by having complete visibility into the full spectrum of contract elements, not only at the time of procurement but on an ongoing basis.”

Plan sponsors that are fully insured or participate in a purchasing coalition may be willing to trade some transparency for predictability. However, in order to leverage all of the components within an employer’s control, it is critical to drive transparency through contract negotiation, plan oversight and on-going claims analysis.

Creating transparency in pharmacy

When creating transparency in pharmacy it is all about controlling the controllables. Here is the summary of the best practices we discussed at our recent webinar. For more detail into how to control the controllables, view the webinar on demand.

Negotiate a strong pharmacy benefit contract

When negotiating a pharmacy contract, language is critical. Precise definitions, as well as guarantees, rebates, exclusions, and other lists must be carefully reviewed to ensure they meet employers’ needs and goals. Vague or ambiguous language can result in costly misunderstandings for employers and their plan members. In a past webinar, we covered four dynamic areas of pharmacy benefits contract that you should know.

Understanding the factors driving pharmacy trends provides valuable insights for negotiation, not just during procurement or renewal, but throughout the contract’s duration. Ultimately, as Louise Shea emphasizes, “you can’t set it and forget it. You need to manage the contract throughout its life.”

Enforce the contract with third-party oversight

Ongoing claims monitoring and contract oversight are critically important for ensuring PBM accountability after the contracting process. You might ask, ‘Doesn’t my PBM already provide this level of oversight on an ongoing basis?’ Yes, but think of the fox guarding the henhouse. It can be revealing to engage an unbiased third party to readjudicate every PBM claim. Through unbiased oversight, employers can not only gain transparency into their pharmacy spend, but also identify claims errors and recover overpayments.

As the saying goes, “What you can’t measure, you can’t manage.”

To learn more about the key metrics to manage your pharmacy contract read Part 2.

Ongoing claims analysis & review

To execute an ongoing monitoring and oversight program, all pharmacy claims must be reviewed to ensure the PBM is processing them correctly. While many providers only cover a sample of claims, reviewing 100% of claims against the contract creates more powerful insights and helps catch errors. Vita Lampietti, Director of Product Management at Truveris, covered the four metrics that on-going claims analysis can unlock:

• Variances: These are differences in per-claim dollar amounts that otherwise should not change and flag errors.
• Utilization and spending data: Trend data helps determine whether utilization aligns with your expectations for your population.
• Rebates: It’s important to keep tabs on what rebates you receive versus what you expect to receive. Most plans don’t have this level of visibility.
• Guarantees: These are represented by contractual discounts listed for different types of claims. If the PBM is underperforming on contract rates, you’ll want to understand the cumulative shortfall and monitor it through the contract term.

“But oversight isn’t just about finding issues or discrepancies,” says Lampietti. “Sometimes contracts perform very well, and that’s also something you would want to know. It could be a sign to push for more aggressive guarantees in your next contract renewal.” A full breakdown of each metric can be found on the webinar on demand.

Take action to drive transparency

Pharmacy represents a substantial opportunity to bend the healthcare cost curve, but it needs to be managed. Market dynamics will continue to impact prices, requiring ongoing oversight of contracts and vendors. Employers who can control their contracts and data are best positioned to drive transparency and achieve results for their pharmacy plan.  Getting there can be complicated, but the right partner can help. Choose a partner that aligns with your goals for objectivity and that leverages technology and data to inform strategy.

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.