Prior to signing your Pharmacy Benefit Management (PBM) contract, it’s essential to pay particularly close attention to the pharmacy services that provide cost-containment strategies. One important component you should focus on is the rebate administration language. Today, we are sharing six areas within the rebate section of your PBM contract, to help you maximize savings and mitigate risk.

1. Guarantee or Estimate

Make sure you understand if the rebate rates included are based on estimates or if they are actually guaranteed. Knowing how your rebate rates are based is important because if you identify the PBM did not meet the rates within the contract and you would like to reconcile payments, it will require that your rates are guaranteed. If the rates are only estimates, the PBM is typically not obligated to pay on any underperformance.

2. Reconciliation Timeframe

The standard timeframe within the marketplace is anywhere between 150-180 days after the close of the year. If the timeframe is longer than that, we would highly recommend that you take a look at the contract language and see if you can reduce that timeframe to something more consistent with industry standards. Shortening this timeframe will incentivize the PBM to be timely in their collection of rebates from the manufacturers, so the PBM can account for as much of the rebate dollars as possible for the reconciliation process. Reducing the timeframe should not hinder you from receiving rebate dollars in the future, even if they come in after the reconciliation period. However, these extra dollars would not be counted in the calculation of the reconciliation.

3. Yearly Increase

Your contract language should include year-over-year increases on rebate rates. This increase will help ensure that your contract is improving each year. When multi-year contracts are in-place, it’s especially important to increase rebates each year to ensure your meeting current market conditions.

Another way to address this yearly rebate rate increase is through a market check. This service ensures you are obtaining the best rates year-over-year. Ideally, you would include both the year-over-year increases of rebate rates, as well as the market check provision on an annual basis.

4. Price Protections

The contract should include language describing how you will receive the benefits of price protections. Including this verbiage in your PBM contract is important due to the result of PBMs having negotiated with drug manufacturers these types of provisions to assist with keeping the rising cost of drugs in-line with reasonable percentage increases. This language will ensure manufacturers cannot increase prices above a certain percentage on an annual basis and these savings will be pass onto you as the payor.

5. Channel Agnostic

Make sure the rebates you are receiving are channel agnostic. By channel agnostic, we mean if a specialty drug is filled at a retail or a mail order pharmacy, you should receive those specialty rebate rates regardless of where that drug is filled.

6. Caveat and Exclusion Items

This final rebate service contract tip is extremely important! Make sure you understand what’s included in your rebate caveat language. For example, if you see over-the-counters are excluded, but there is no caveat that states ‘except for diabetic supplies,’ there may be an opportunity to ensure these are included and part of the rebate service and reconciliation. There is a huge opportunity for rebates when it comes to diabetic supplies and you need to make sure you’re receiving the full benefit of these rebate dollars.

If you have any questions or if you’d like to discuss rebate contracting best practices in greater detail, please reach out to us at!