Three Key Differences in the PBO vs PBM Models

With prescription drug trend rising at an alarming rate of 4.8%, managing prescription drug costs is more important than ever. It requires an expert level of focus and superior attention to detail. There are several pharmacy benefits providers in the market, and it’s important to understand the value of the traditional pharmacy benefit managers (PBMs) compared to the newest option – an independent pharmacy benefits optimizer (PBO).

Comparing a PBM to a PBO

To ensure your clients have a properly constructed pharmacy benefits arrangement that addresses their specific needs, it’s important that you do your due diligence to evaluate the nuances among the proposals you receive. Before you settle on a pharmacy benefits provider this year, consider these key differences between the PBM and PBO models:

• Approach to long-term savings: Ensuring your clients achieve the greatest savings long-term means ensuring they can secure the best pricing each year. PBM contracts typically are negotiated on a three-year basis and designed to show the best projected pricing and rebates for several years at a time. The PBO model offers one-year contracts with pricing and rebate terms that are refreshed each year according to the latest market changes, taking into account any variances in the plan’s performance over the year. Do the math on the options to understand how your clients will benefit under each arrangement before making a decision.
• Focus on transparency: Transparency is an industry buzzword these days, so it’s important to be confident that your pharmacy vendor actually is delivering transparency. Having visibility into specific contract terms makes it easier to understand the fine print behind the big promises. All too often, employers become victim to Big Pharma preying on their lack of knowledge. A contract offer or guarantee may seem like a win for your client, but when the fine print is revealed and examined closely, those terms and guarantees reveal an alternate agenda at play. PBM contracts, in particular, are notorious for using complex and confusing language, as well as offering add-ons that contain hidden limitations or obscure requirements. PBO contracts contain simplified, transparent language that breaks apart the traditional PBM-speak into employer-friendly terms and guarantees. It’s important to comb through the details yourself or seek the help of an independent reviewer.

• Self-insured benefits coverage: Achieving optimal pharmacy benefits pricing does not mean having to settle for a reduced quality of care. PBMs offer multiple strategies and programs to manage utilization and improve healthcare outcomes, but they also own the fulfillment channels and typically require the employer to use those entities. This results in cost and utilization management strategies that can conflict with the employer’s goals or contradict a self-funded employer’s goal of customizing the plan to their unique needs. The PBO model takes an independent approach to optimize an employer’s prescription drug costs and clinical quality. As a conflict-free provider, the PBO model uses the employer’s claims data to recommend strategies that will reduce wasteful spending while providing their members with access to the medications they need.

The differences in contracting with a PBO vs. a PBM can mean the difference in whether you have a truly transparent contract, written in your best interest, with the best long-term Rx savings strategy.

Shannon McAnulty

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Questions to Ask Yourself

A thorough comparison of the proposed pharmacy benefits contract terms will go a long way in helping ensure your clients will achieve the financial and clinical outcomes you – and they – expect. As you prepare to review your clients’ annual pharmacy plan performance data, consider these questions in your evaluation:

1. What is your long-term strategy to manage ongoing pharmacy spend?
2. Can you manage and adjust the pharmacy benefit as a stand-alone entity?
3. What visibility do you have into the plan’s pricing terms and performance data?
4. How are high-cost specialty drugs affecting your bottom line?
5. Is your contract enforceable?
6. What are your rights to audit and exit the contract, if necessary?

Download the free e-book, Definitive Guide to Optimizing Pharmacy Benefits, to learn more about how to determine the best approach for solving the challenges facing your employer clients.