Pharmacy Benefit Managers (PBMs) play a crucial role in managing prescription drug benefits on behalf of health plans, employers, and other payers. However, not all PBMs operate with the best interests of their clients in mind. Self-serving PBMs can inflate costs and limit access to necessary medications.
Key Warning Signs of a Self-Serving PBM
Lack of Transparency
Transparency in financial dealings and contract terms is essential for any PBM partnership. Self-serving PBMs often obscure their pricing structures and rebate arrangements, making it difficult for employers to understand the true cost savings being achieved. If your PBM is reluctant to disclose detailed financial information or explain how rebates and pricing work, it may be prioritizing its profits over your organization’s savings.
Hidden Fees
Hidden fees can significantly increase the cost of PBM services. These fees might include administrative charges, data processing fees, or other vague service charges not clearly outlined in the contract. Employers should scrutinize their PBM agreements for any ambiguous or undisclosed fees that could be adding unnecessary expenses.
Misaligned Incentives
A self-serving PBM might favor higher-cost drugs over more cost-effective alternatives due to higher rebates from manufacturers of expensive medications. This practice not only increases overall healthcare costs but can also compromise the quality of care for employees by limiting access to more affordable medications.
Restricted Formularies
Formularies should be designed to provide the best and most cost-effective medications for employees. However, some PBMs may restrict their formularies to include only drugs from manufacturers that offer the highest rebates. This limits treatment options and can drive up costs unnecessarily.
Opaque Contract Terms
Contracts with PBMs should be clear and straightforward. If a PBM’s contract terms are overly complex or difficult to understand, this may be a tactic to hide unfavorable terms. Employers should seek contracts that are transparent and easy to comprehend to avoid unexpected costs and ensure fair practices.
Best Practices for Choosing a PBM
Demand Transparency
Insist on full transparency from your PBM regarding pricing, rebates, and any fees. Ensure that all financial dealings are clear and understandable. This will help you make informed decisions and avoid hidden costs.
Conduct Regular Audits
Regular audits of your PBM’s performance and pricing can help identify any discrepancies or areas where costs could be reduced. This includes reviewing claims data, rebate arrangements, and overall cost management practices.
Negotiate Clear Contracts
Ensure that your contract with the PBM is clear and free of ambiguities. Clearly define all terms and conditions, including fee structures and rebate arrangements, to avoid any unexpected charges.
Monitor Formularies
Regularly review the formulary provided by your PBM to ensure it includes a wide range of cost-effective and necessary medications. Push for a formulary that prioritizes patient health and cost savings over PBM profits.
Engage in Open Communication
Maintain open and ongoing communication with your PBM. Regular meetings and reviews can help ensure that your PBM is meeting your organization’s needs and addressing any concerns promptly.
Choosing the right PBM is crucial for managing prescription drug benefits effectively and affordably. By being aware of the warning signs of a self-serving PBM and implementing best practices for selecting and managing your PBM relationship, you can ensure that your organization and employees receive the best possible care and cost savings.