Why Your PBM’s Conflict of Interest May Be Costing You

With the increasingly high cost of prescription drugs, self-funded employers now more than ever need strategies that better align their pharmacy benefits contract and relationship with their long-range organization goals and employee benefits objectives. Achieving this flexibility and alignment is especially critical for hospitals who function both as employers and providers of health care services. From the C-suite down, hospital leaders looking to lower costs system-wide are being forced to consider making cuts to their employee benefits program. What they may not realize is that most PBM contracts are misaligned to the hospital system and are written to benefit the PBM, not the hospital. By helping your hospital clients secure a more efficient benefits model aligned to their goals, they can leverage the resources unique to their hospital system and achieve the cost-savings they need while maintaining affordable benefits for their employees.

Aligning Pharmacy Benefit Contracts & Plan Design

Hospitals need strong pharmacy contracts with the best rates and rebates, but they also need a contract that allows flexibility in how the prescription drug products are handled. If the health system has an on-site pharmacy and can leverage their cost of goods, a channel-agnostic contract can be used to drive prescription fills to the hospital’s on-site pharmacy, not the PBM-owned pharmacy. With scripts being filled at the in-house pharmacy, claims are submitted as pass-through reimbursement, eliminating any spread to the PBM. Whatever the pharmacy submits for that claim is exactly what the benefit plan is paying. This ability to utilize the hospital-owned pharmacy as the preferred pharmacy is especially important for specialty medications, which now account for as much as 50% of the hospital’s pharmacy benefit costs.

Along with a channel-agnostic pharmacy benefits contract, hospitals also need the ability to promote appropriate utilization within the benefit design and driving utilization to the hospital’s on-site pharmacy. Think about this from the hospital’s perspective: they own the hospital, they purchase the prescription drug products, and they own the pharmacy. They want to use those resources to purchase medications at the price available to them – whether that’s GPO, 340B, or own-use pricing – and fill prescriptions at their own pharmacy. Most hospitals also do not want mail-order and 90-day scripts being driven to the PBM’s pharmacy. Instead, they want to fill those scripts, and they want member communication and engagement to come from their hospital system. Most PBM contracts do not allow for this level of flexibility, putting the hospital system at a disadvantage.

Saving Money with a Conflict-Free Arrangement

Achieving this level of pharmacy benefits alignment can result in significant cost-savings for the hospital system. On average, hospitals have been able to capture more than 80% of the overall pharmacy expenditure while providing the lowest net cost to the hospital system. One health system in the Northeast United States with 3,145 members achieved 5% savings by switching to a channel-agnostic pharmacy benefits contract. The new arrangement optimized use of the hospital’s on-site, owned resources and used the hospital’s preferred pharmacies first, instead of the PBM-owned pharmacies. The contract also allowed for improved pricing flexibility and applied best-of group purchasing, 340B, or own-use pricing. By increasing prescription capture through the new preferred pharmacy arrangement, the health system reduced its pharmacy trend by 5.6% PMPM.

The stakes have never been higher for hospital employers to achieve a more efficient, cost-conscious benefits model. Under a channel-agnostic pharmacy benefits contract, hospitals are free from the inherent conflicts involved with most PBM contracts. The areas of change described above provide you, as the health system’s employee benefit consultant, with the opportunity to help them better utilize their own resources to lower costs on pharmacy expenditures and keep those valuable healthcare dollars within their hospital.