Client Sees $3.6 Million in Pharmacy Spend Savings After New Pharmacy Benefit Manager Contract Implementation

See an example of this client’s PBM contract analysis here.

The Client

Employer with 3,000 enrolled employees

The Challenge

The client experienced a continuous rise in their pharmacy spend and sought solutions to lower this expense without transferring cost to employees.

The Solution

The client enlisted the help of the CaravusRx team of Certified Pharmacy Benefits Specialists and Pharmacists to take a deeper look into their current PBM contract. After review, our team discovered their current PBM contract contained the following clauses that were responsible for the group’s spiking prescription drug costs:

Ambiguity in Contract Definitions

The client’s PBM contract included key terms that were not clearly defined, allowing the PBM flexibility in pricing and/or calculation of guarantees for average wholesale price, the maximum allowable cost (MAC) list, and brand, generic and specialty drugs.

Deficient Transparency in Pass-Through of Claims and Cost Rebates

The client’s current contract was “spread-based” and did not charge a fee for its standard services. The team deemed this clause a “red flag” as it means the PBM was receiving revenue from other sources while also charging the client a different fee that it was reimbursing back to its network pharmacy for dispensed drugs.

Lack of Competitive Pricing in Three-Year Contract

The client’s current PBM proposed a contract that would lock them into a three-year arrangement, allowing the organization to maintain a certain brand drug discount for that amount of time, when the market typically improves drug discounts year after year. The PBM’s proposed rebates were also significantly lower than the market average for both retail and specialty medications, and the contract lacked allowance for drug industry cost-saving options for members.

The Outcome

After presenting these findings, the client decided it was time to search for a new Pharmacy Benefit Manager (PBM). The CaravusRx team completed a PBM sourcing project, and found the client a new partner that offered:

·         A transparent, pass-through arrangement

·         Enhanced discounts offered to lower future prescription drug costs

·         A revised rebate guarantee to increase rebates beyond the rebates offered by their former PBM

·         Options to allow the plan to benefit from alternative funding sources

·         A year to year contract term

The CaravusRx Team then coordinated the implementation of the new PBM, with a focus on creating as little disruption as possible for employees and their dependents.  

Based on the employer’s historical claim experience and the specific prescriptions used by their members, the new PBM contract is expected to reduce their pharmacy spend by $3.6 million in the coming year, a cost reduction of over 24%.