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August 11, 2011

Make Your Prescription Benefit Manager Work for You

Summary:

The majority of large employers today do not have the necessary tools at their disposal to decipher and use to their advantage the key relationship between the actual Prescription Benefit Manager (PBM) claims pricing received and the contract language that supports those claims.

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Does your Prescription Benefit Manager contract deliver the actual pricing printed on its pages?

Can you verify the actual pricing?

If you can’t accurately benchmark your pricing, how can you competitively analyze your program or implement any meaningful predictive strategies?

The majority of large employers today do not have the necessary tools at their disposal to decipher and use to their advantage the key relationship between the actual Prescription Benefit Manager (PBM) claims pricing received and the contract language that supports those claims.

It is all well and good to negotiate an average wholesale price (AWP) less 72% for a certain tier of drugs from your Prescription Benefit Manager, but how do you verify that is in fact what you are getting? Your contract may back up and document that discoun,t but does that mean you are receiving it? It is critical for the purchaser of prescription benefits to understand that what they believe they agreed to in contract negotiations and what appears to be supported by the Prescription Benefit Manager contract is not necessarily what they are receiving. In fact, discounts are often inflated making contracts look great on paper but not so good in reality.

The distractions of the Prescription Benefit Manager procurement process sidetrack most employers, which shifts their focus in the wrong direction giving way to perception and not reality. Terms like pass-through, transparency, rebates and average wholesale price, combined with the presentations of the competing Prescription Benefit Managers, leave most employers with more questions then when they began. Even Prescription Benefit Manager executives become confused when comparing their own proposal to that of a competitor.

Your primary concern should be to understand the discounts you are receiving or what you are actually paying. You must evaluate all Prescription Benefit Manager pricing with specific criteria that eliminates individual Prescription Benefit Manager discount methodology. This precise methodology language must be embedded into the contract so you are playing by your rules and not the rules of the Prescription Benefit Manager. Your discounts can then be validated to ensure that you are getting what you pay for.

With specific pricing criteria, you can take the mystery out of prescription pricing, and by understanding the true cost of your drugs, you are in a better position to evaluate ancillary programs that Prescription Benefit Managers may offer. In addition, it is just as important to audit and validate the pricing on an annual basis to police the pricing accuracy.

All Prescription Benefit Managers have their own approach to managing costs — some are better than others and may or may not be in your best interest. When you are spending millions of dollars a year on prescription drugs, you have to take a sound business approach and protect yourself through your Prescription Benefit Manager contract. Only when you really understand the costs of your drugs and true discounts you receive can you begin to evaluate the overall value that a Prescription Benefit Manager can bring to you.

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About the Author

Scott Martin is the founder, CEO and chairman of Remedy Analytics, a healthcare data analytics technology company that partners with employers to protect their prescription benefit interests. Martin is a three-time entrepreneur dedicated to making healthcare easily comprehensible and affordable for patients and providers.

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