Transparency in Your PBM Contract – Fact or Fiction?

Many Pharmacy Benefit Manager (PBM) organizations hold themselves out to offer complete transparency and wholesale pricing in the contracts they offer employer groups.  Employers must truly understand their contracts in order to make the determination on whether the PBM they are working through is, in fact, offering these arrangements.  Just because the PBM tells you they offer these provisions doesn’t necessarily make it true.  In other words, “Trust, but verify.”

Reading a PBM contract is like watching paint dry for most people.  The legalese that predominates these contracts makes them good bedtime reading when you are desperately trying to fall asleep. They are written by attorneys that represent the PBM and are laden with terms and provisions meant to protect the PBM’s profit margins, not the employer’s pharmacy spend.   Nonetheless, employers must take the time to truly understand the provisions of their contracts or they run the risk of hemorrhaging the dollars they spend on pharmacy.

The popular buzz words in the industry are “transparency” and “pass through pricing.”  However, be careful of PBM contracts that promise this scenario and never deliver.  These contracts can be written in such a way that some types of drugs, say retail, are delivered at pass through pricing, meaning the PBM is charging the employer health plan the same amount as it was charged.  However, other types of drugs like mail order and specialty drugs get marked up at exorbitant levels thus effectively eliminating or minimizing the savings that were created by obtaining pass through pricing of retail drugs.  Buyer beware.

Take the time to make sure your PBM contract contains the terms and conditions necessary to guarantee complete transparency and pass through wholesale pricing.  You can do that by making sure the language in the contact doesn’t contain ambiguous wording, non-specific terms, etc.  Make sure than you prevent the PBM from obtaining more favorable compensation arrangements than might otherwise exist if not for your “blocking” language.

Pharmacy Benefit Manager

In order to truly verify your contractual protections, it is necessary to obtain prior agreement (through your contract language) that the PBM will allow third party audits at periodic times.  Insist that the claims auditor be chosen AT YOUR DISCRETION, not the PBM’S.

Taking the time to understand your PBM contract is time well spent.  Taking the time to craft a PBM contract that is TRULY transparent with wholesale pricing is time better spent.


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