Top 3 Things You’ll Learn
- Whether or not bundled pharmacy benefits contracts really save employers the most money
- How vertically integrated carved-in models underperform for middle-market employers
- Top three advantages of a carved-out vs carved-in pharmacy benefits plan
To carve-in or carve-out, that is the question. Employers have long been promised that the ongoing vertical integration in the pharmacy benefits industry would lead to a more consistent, efficient healthcare model that would result in lower costs for their benefits plans. In reality, employers are leaving money on the table by staying in those bundled pharmacy arrangements with the medical carrier, regardless of group size, vertical, or region. Real dollars and real lives are at stake – it’s time that employers across the country secure a more optimal pharmacy benefits arrangement.
Employers Losing Leverage
As drug costs and utilization of high-cost specialty medications continue to rise, employers are quietly losing the little leverage they had. This is evident in the carriers’ attempts to impose out-of-reach thresholds and excessive penalties for employer groups who want to carve-out the pharmacy benefit. There’s a reason why 94% of Fortune 100 companies carve-out pharmacy benefits – and a reason the carriers are set on preventing smaller groups from doing it.
Without having the scale of the large enterprises, non-Fortune 100 companies continue to face a financial, service, and clinical disadvantage in many carved-in pharmacy arrangements. Under a carved-in plan, employers sacrifice group purchasing power and contract negotiation opportunities that have the potential to yield substantial savings. In contrast, a carved-out pharmacy arrangement can provide the dedicated pharmacy expertise, clinical oversight, and tailored solutions that are necessary components for ensuring that the pharmacy benefit receives the same due diligence as the medical benefit.
For non-Fortune 100 companies, carving-out pharmacy is a critical component of managing affordable health care benefits. For some, even the smallest amount of savings could make a critical difference in the health care benefits program they offer to their employees.
The Carve-Out Advantages
Pharmacy benefits provide a critical and highly utilized service to plan members, making it essential that employers have full visibility into the actual performance of their pharmacy benefits plans. Advanced pharmacy data analytics can be applied to uncover the financial and clinical risks lurking beneath the prescription drug program’s surface. At the same time, the insights presented can reveal opportunities to introduce new clinical strategies that promote medication appropriateness and member safety.
Carving-out pharmacy enables even the least sophisticated prescription drug purchasers to find considerable savings and achieve their employee wellness goals. Carving-out the prescription drug program comes down to three things: transparency, control, and insights.
Transparent Contract Terms
Best-in-class pharmacy benefit contract practices include full pricing and rebate transparency, straight forward language, visibility into plan financial performance, and the ability to perform audits. Having a clear view into pharmaceutical rebates, as well as guaranteed discounts reconciled at the individual client level, is critically important. When a company is carved-in, they can’t see the details behind their contract and it is common to not have guaranteed rights when it comes to pharmacy contract terms.
As a result, most employers in a carved-in pharmacy arrangement do not know their specific contract terms and the definitions that can significantly alter their pricing and rebate terms. This lack of transparency into the contract means the employer lacks a full understanding of the pharmacy financials, which negatively impacts their ability to negotiate a more competitive deal. They may not even realize they’re locked into a multi-year arrangement that is not delivering the most competitive discounts, does not include future price improvements nor guarantee key performance metrics.
Plan Control and Flexibility
Every employer has different needs and priorities when it comes to their pharmacy plan. Some are very price sensitive, while others are far more concerned with retaining top talent or minimizing member disruption. Having control means having the power to choose what’s right for the pharmacy plan rather than have it be dictated by the carrier. In a carved-in arrangement, employers often receive pre-packaged plan designs that provide very little flexibility. This limits their ability to respond to changes in the pharmacy landscape and in their business.
Giving employers the power to choose what’s best for their company, their employees, and their members when it comes to pharmacy benefits, trend management programs, and contract terms is an important benefit of carving out. When carved-out, employers have the insights and ability to implement programs and strategies tailored to their risk areas and goals that help them manage their trend with minimal member disruption. The employer can decide, with guidance from a clinical expert, which programs are right for them.
Actionable, Tailored Insights
The ideal approach to managing pharmacy benefits combines the employer’s complete pharmacy claims historical data – as opposed to the carrier’s book of business data – with specialized expertise that addresses clinical risk areas and cost-savings opportunities. An employer in a carved-in arrangement may receive data on their trend and performance from the insurer. However, unless they have someone on staff with the expertise to be able to interpret the data, it may not help them in making decisions.
Companies that carve-out have access to dedicated pharmacy teams that know how to examine their data and provide the guidance they need to make informed decisions. Carving out gives employers access to their plan-specific Rx data that allows them to see what’s happening with their benefits from the macro to the micro level. With that pharmacy data in hand, employers are able to understand what they’re getting for their money and what is impacting their budget and their members.
Despite the promises made by the large insurance carriers, the data shows that employers of all group sizes, verticals, and regions are still leaving money on the table by staying in those bundled pharmacy-medical arrangements.
The Bottom Line
Even with the vertical integration of the top pharmacy benefit managers (PBMs) and major insurance carriers, the bundled – or carved-in – arrangement leaves much to be desired for employers seeking maximum benefit value. Despite what the big insurance carriers say about bundled contracts, the advantages and savings potential from partnering with a carved-out pharmacy benefits partner is unmatched. Carving-out the prescription drug benefit still provides the best access to critical Rx insights, contract and utilization oversight, and targeted cost-savings strategies for companies to effectively manage their pharmacy plan spend.
Rather than sit back and wait for your client’s pharmacy plan to improve, you can act now to ensure their pharmacy benefit arrangement is serving them well. The best way to understand whether carving-out or staying carved-in makes the most sense is to complete a pharmacy plan performance evaluation and compare the options on an apples-to-apples basis. Making changes that align with your objectives, instead of being forced into unwanted changes, is the only way you can ensure your clients are protected and equipped with a sustainable pharmacy arrangement.
