Pharmacy Coalitions: Are Your Clients Getting a Winning Pharmacy Plan?
Top Three Things You’ll Learn
- The difference between a coalition and a PBO
- Why the highest contract savings doesn’t necessarily mean the lowest net cost
- How to ensure your client’s needs are the top priority of your pharmacy partner
Navigating employee benefits is complicated. As a Benefits Advisor, it’s vital to retain your book of business while providing your clients with a best-in-class, optimized pharmacy program. But how do you do this when benefit costs are skyrocketing, and, according to McKinsey & Company, healthcare costs are expected to increase at a rate of 7.1% per year for the next five years? In 2023, pharmacy costs rose at a higher rate than any other component of healthcare costs and there is no end in sight.
This is why choosing the right pharmacy partner that offers a combination of a strong, competitive contract and superior clinical management is so critical. Through member pooling, certain organizations facilitate the development of plans that utilize purchasing power comparable to that of a Fortune 100 company. This translates to substantial savings for your clients on rates and rebates.
While there are many options for managing pharmacy benefits, two options to consider are:
- Coalitions
- Pharmacy Benefits Optimizers (PBO)
What is a Coalition?
A coalition is owned and operated by brokers, plan sponsors, employers, or other industry stakeholders.
- Provides contracts and cost savings for pharmacy benefits.
- Do not typically provide clinical and service management. This is managed by a third party, usually a large Pharmacy Benefits Manager (PBM).
- The third party generally has their own priorities for plan management that may not benefit you and your clients.
What is a PBO?
A Pharmacy Benefits Optimizer (PBO) is an independent expert.
- Provides contracts, cost savings, and comprehensive pharmacy benefit management.
- Provides client-aligned, independent clinical and service management.
- Includes PharmD-led clinical reviews and personalized member services.
This type of arrangement can be a game changer for self-funded employers of all sizes, but the two types of partners can provide vastly different net costs and experiences.
Cost Savings vs. Lowest Net Cost
An increase in chronic conditions among members or the ever-increasing cost of specialty treatments can result in significant expenses for employers. Both PBOs and coalitions can offer better pricing structures.
However, cost savings is not the same as receiving the lowest net cost.
Coalition contracts can show substantial savings in year one, but those savings may diminish over time, especially when your client is locked into a three-year contract. A coalition can help with the initial contract but leaves the employer on the hook for future issues like risk mitigation, medical necessity reviews, stop-loss coverage, or member health and safety.
Conversely, a PBO will also have cost savings in year one (20-25% on average), but the true benefit will show up in future years as the contract is adjusted annually to adapt to your employer’s specific needs. Independent clinical management will yield an additional 5-7% savings and improve member health and safety.
In most companies, just 2% of members account for 50% of the spend. A single employee with one high-cost condition, without additional protection measures in place, can leave the employer at risk of receiving a massive bill.
Coalitions May Not Be Managing Your Client’s Plans
Coalitions can unlock improved initial contracts, but the management of the plan goes to a PBM. The PBM will control the following:
- Which scripts get approved, prioritizing the interest of the PBM.
- How much support each client gets. This can leave employers with inadequate support because they lack the bargaining power of a larger group.
PBO’s offer these tailored solutions for a perfect fit:
- Independent, unbiased clinical management.
- Offer flexible one- year contracts that adapt to evolving needs of the client.
- Align Clinical programs with an employer, which may include excluding costly GLP-1s for off label usage.
- Provide comprehensive support with a fully U.S. based team dedicated to assisting both employers and members.
A PBO Specializes in Clinical Utilization Management
Buying a $400,000 Lamborghini with a 25% discount results in savings of $100,000. But if all that is needed is transportation to the grocery store, purchasing a $30,000 car at full price offers a far lower net cost.
The same is true for saving money on an expensive but medically unnecessary drug. PBOs use Pharm-D oversight rather than algorithms like the PBMs to determine the medical necessity of a drug. Having a pharmacist-led review of the prescriptions will benefit your client’s bottom line and their member’s health by eliminating wasteful spending.
Elevate your position and increase client retention with a custom fit
You aren’t like everyone else, and neither are your clients. Why settle for a one-size-fits-all plan when you can have one designed specifically for your clients and their employees? Plus, the plan can be adjusted annually to ensure ongoing cost savings without compromising quality, keeping your clients loyal to you.
You advocate for your clients, and we do too. This unique partnership enhances your client’s employees’ lives and yields financial advantages annually.
PBOs provide employers with benefits beyond just cost savings
If you are looking for long-term cost savings for your clients, a PBO is the superior choice. Your clients can get purchasing power equal to large-scale employers while getting hands-on oversight of your plan that ensures that your clients are receiving the benefit, not just the PBM. And you have the peace of mind that you are providing your clients with a best-in-class pharmacy program that will further strengthen your broker-client relationship.
A pharmacy benefits optimizer will be your steady partner, looking out for the best interests of your clients and their members so you can deliver a winning pharmacy plan. Learn more about how drug price increases impact your clients’ plans here.
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