MYTH: The best spreadsheet pricing (i.e., rebate, network discount, and administrative fee pricing) means the lowest net cost to the plan sponsor.

FACT: Superficial guarantees on rebates, network discounts and administrative fees via traditional self-funded pricing does not guarantee lowest net cost to the plan sponsor nor does it provide for budget predictability.

How a PBM is compensated or generates revenue can influence how “misaligned” they are with a plan sponsor’s financial or budgetary goals based on that PBM’s rebates, formulary and clinical objectives which directly influence pricing and cost-containment strategies. Are these objectives designed to increase the PBM’s revenue or provide the plan sponsor’s with the lowest net cost? In many traditional self-funded arrangements, a PBM’s revenue is increased as utilization and drug spend increases, not the other way around, which already misaligns their financial incentives with the plan sponsors.

PBM’s providing traditional self-funding arrangements typically implore various methods to increase their revenue beyond the administrative fee they identify as their source of revenue in these types of offerings. These additional methods of revenue that are not identified in their proposals include:

• Spread pricing (i.e., the PBM pays the pharmacy one price but charges the plan sponsor a higher price, which the PBM retains the difference)
• Administrative and clinical fees (i.e., the more claims processed the more revenue is brought in through additional charges for fees related to adjudication, clinical edits, etc.)
• Retaining a portion of the rebates (i.e., rebate administrative fees or a % of the rebate value itself is kept by the PBM and enhanced by driving members to higher cost, higher rebateable drugs based on formulary placement or through clinical edits such as step therapy).
• Allowing for non-covered drugs to be paid by the PBM to increase their revenue stream and with no fiduciary or financial risk accountability (i.e.., no financial risk at stake to the PBM = no financial accountability to the PBM)

For benefit consultants and brokers evaluating pharmacy benefit solutions, it’s important to look beyond a PBM’s proposal offering of discounts and rebates and ask:

Are my PBM’s financial incentives aligned with my clients (plan sponsors) financial goals?

Does the PBM’s various financial caveats in their proposal “water down” my guarantees on rebates and discounts?

At Benecard Services, our fixed rate model was created to be financially aligned with our plan sponsors financial goals. We do this by creating:

• Aligned financial goals – when financial incentives are aligned, managing costs becomes a shared goal
• 100% risk protection
• No spread pricing
• Rebates factored into monthly program charges and floated to the plan sponsor in month one of coverage – traditional self-funding doesn’t provide rebates until 9 months after the start of coverage
• Return of Savings – 100% of all savings based on positive plan performance at the conclusion of the contract year is returned to the plan sponsor
• No financial reconciliations or supplemental invoices due at the end of the year
• Full plan design autonomy retained by the plan sponsor
• Fully compliant with all Federal and State regulatory requirements as applicable to our model

Interested in learning how financial alignment impacts pharmacy costs? Contact your Benecard Representative at talktous@benecard.com.

Want more? Helping clients achieve the lowest net cost requires looking beyond rebate guarantees. Discover the questions every broker should ask when evaluating PBM proposals in the article below.