When it comes to pharmacy benefits, evaluating discounts, rebates, and other top-line financial metrics may appear most influence to the financial health of the program. But can sometimes mask higher ingredient costs, exclusions, and contract terms that drive up total spend over time.
This has led to increased interest in achieving lowest net cost, an approach to pharmacy that focuses on the full economics of a pharmacy benefit rather than individual pricing variables. Framed this way, lowest net cost is intended to serve as a comprehensive strategy for PBM contracting and ongoing claims management that aligns revenue incentives and member outcomes to the actual, all-in cost of the plan.
What is Lowest Net Cost?
In a lowest net cost pharmacy model, success is measured by a reduction in total plan spend and improved financial predictability over time. This can be achieved by any number of different contract strategies and methods, and several approaches have recently gained momentum in the market, such as:
- Procurement strategies
- Formulary and utilization management
- Financial programs
- Clinical programs
A lowest net cost approach orients pharmacy benefits spend towards the total cost of the drugs covered under a pharmacy plan after accounting for all discounts, ingredient costs, rebates, administrative and dispensing fees, offsets, and other revenue or cost factors that affect both the plan and its members. It is a holistic measure of pharmacy benefit expense designed to reflect the actual financial impact of the plan’s drug utilization, rather than pricing margins or rebate-driven metrics.
Plans that adopt a lowest net cost philosophy may see greater financial contractual control in the long term.
But implementing this approach requires a more engaged, data-driven strategy that emphasizes precision in PBM contract structure and management, plan design flexibility, and ongoing performance monitoring.
Strategies for Applying Lowest Net Cost
To implement a lowest net cost approach, employers have begun focusing on several strategies to securing and maintaining their pharmacy benefits. Depending on a plan’s unique population needs, utilization trends, and ongoing pharmacy strategy, some or all can be applied in the pursuit of lower net cost spend in pharmacy:
- Procurement strategy sets the foundation by leveraging competitive pressure and thoughtful negotiation to secure transparent pricing, enforceable guarantees, and establish accountability from the outset.
- Formulary management and projected utilization addresses the composition of covered drugs and how utilization may be shifted to prioritize lower net cost drugs over drugs with higher rebates.
- Clinical programs help validate the use of high-cost medications while supporting members in adhering to the therapies that deliver meaningful health outcomes.
- Financial programs and methods, like copay assistance, alternative funding, and international drug sourcing can supplement a broader strategy by reducing plan costs in targeted ways.
- Disruption and plan change management will likely accompany any of these strategies as members are required to adjust their prescriptions or pharmacy processes.
These strategies and more are explained in detail in Truveris’ eBook on lowest net cost.
eBook: “Achieving Lowest Net Cost in Pharmacy Benefits”
Lowest net cost is more than a pricing concept. It is a structured way to contract, design, and manage a pharmacy benefit plan so that results match the plan’s financial goals and member needs.
Truveris’ eBook, “Achieving Lowest Net Cost in Pharmacy Benefits,” expands on each of these five areas with practical evaluation criteria, contractual language considerations, and implementation guidance that translate strategy into measurable outcomes.
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.
