When you sign a contract with a Pharmacy Benefit Management company (PBM), you may assume that it will deliver on providing you the best drug prices and other discounts you are entitled to. After all, PBMs have infrastructure to support efficient and scalable administrative services, maintain flexible claims processing engines, offer expertise in negotiating drug discounts and pharmaceutical manufacturer rebates, and develop and manage drug utilization management programs.

With that said, not all PBM contracts are created equally, and not all benefit the client as you may expect.

PillarRx is uniquely positioned within the PBM consulting space as we have a very diverse client base; serving health plans, state and local governments, self-funded entities, business coalitions and Taft Hartley plans, and our clients range in size from 100 up to 1,00,000 lives.

Some might think clients on each end of that size spectrum would have very different needs but would be amazed to learn how many commonalities there are!

One example is the value of conducting a PBM Pricing Audit. So many times, when we are working with a smaller or midsize client, they seem surprised when we begin talking about PBM Pricing Audits. We hear potential clients make statements like, “Oh, we’re not big enough to worry about having to audit our PBM” or “We have a good relationship with our PBM so I’m sure everything is fine.”

The truth of the matter is it is almost impossible for clients of any size to know whether or not the PBM has delivered on the guarantees described in the contract. This is in large part due to the complex and non-transparent variables and caveats often included by the PBM in the contract.

Related: PBM Transparency: What You Need to Know

There are several reasons to conduct a PBM Pricing Audit, here are a few:

• PBM vendor relationship change
• Vendor management and contractual oversight
• Confirm expected contractual terms and guarantees are being adhered to
• Change in member needs or pharmacy benefit program offering

For those reasons, we believe that it is essential and a best practice to hire an experienced, independent third-party auditor with extensive experience in PBM pricing analysis to thoroughly audit your PBM.

Your company will benefit from such audits financially in at least these four ways:

1. PBM Contract Assessment

This includes a review of drug definitions, pricing terms and conditions, and guarantee exclusions and calculation methodology.

This review allows clients peace of mind that the PBM contract maximizes cost-sharing opportunities includes compliance protection and minimizes client risk. Our team has reviewed hundreds of PBM contracts. Later this month, we will be sharing PBM contract pitfalls you should look for before signing an agreement.

2. 100% of claims will be reviewed by channel (i.e. mail order, retail, retail 90, and specialty) as well as component (i.e. brands, generics, and specialty drug discounts and dispensing fees)

Mis-adjudicating one type of pharmacy claim by channel or component can have catastrophic implications for your bottom line. A generic drug being adjudicated as a brand or misaligned copays negatively impacts pharmacy program dollars. Finding 100% of erroneous pharmacy claims ensures you are not being charged more than what your contract allows.

3. Estimated calculation of expected rebates

Calculating pharmaceutical rebate dollar allocation starts with evaluating your contract. Are you paid rebates based on minimum guarantees, full-transparency, or are they paid at the point of sale? Our team calculates rebate dollars based on your agreement and determines if rebates were properly paid to each party. If discrepancies are found, we will act as your advocate to get you your money!

4. Audit results are compared to industry benchmarks to evaluate market competitiveness

Maintaining a market-competitive contract allows for better rates and financial oversight throughout the duration of the agreement. What may have started as a highly competitive contract, may not remain so without benchmarking.

Related: What is Benchmark Data and Why it is Important?

The best contract in the world is useless unless the plan sponsor retains and utilizes some means of validating the terms and provisions. This is where an independent audit is invaluable and can save you money. The experienced auditor can confirm if the terms are being met, where the errors reside, and whether the plan sponsor is receiving what is contracted. Additionally, an audit can identify whether plan members are paying the correct copays and whether drugs are being adjudicated properly (pricing, exclusions, prior authorization, and so on).

Have a question? Leave a comment or contact us today!