Playbook developed to equip purchasers to tackle flawed contracting models and lack of competition
due to market consolidation
WASHINGTON – June 26, 2023 – High prescription drug costs continue to bankrupt families, put financial strain on businesses, and drag down the US economy and pharmacy benefit management plays a significant behind-the-scenes role. To arm employers and other plan sponsors with a blueprint to understand and navigate PBM relationships and strengthen their negotiating and contracting capabilities, the National Alliance of Healthcare Purchaser Coalitions (National Alliance) developed A Playbook for Employers – Addressing Pharmacy Benefit Management Misalignment.
“As fiduciaries, employers have a responsibility to challenge industry misalignment and self-dealing, and this playbook offers strategies to contract for and build a more trustworthy, responsible and sustainable marketplace,” said Michael Thompson, National Alliance president and CEO. “With health plans and PBMs increasingly owning each other and the growing side deal payment arrangements to consultants and brokers, this is a classic case of the ‘fox guarding the henhouse’.”
The comprehensive resource examines the role of the fiduciary in pharmacy benefit management and offers insights on the drivers of pharmacy benefit costs and value, and flaws in the contracting and negotiation process. Purchasers also have access to best practice checklists, sample questionnaires for selecting consultants and recommended contracting language that would typically require an investment of thousands of dollars to obtain from their legal counsel.
The top 10 pharmacy benefit management concerns identified by an industry advisory committee and purchasers working with the National Alliance for this initiative are:
- Promotion of higher-price drugs when lower-price drugs are available.
- Coverage and/or preference of a brand when a generic or biosimilar is available.
- Coverage of specialty drugs for circumstances that clinical evidence does not support.
- Automated approval process for prior authorizations causing rates to soar over 90%.
- Redefining generics as brand drugs or vice-versa to manipulate guaranteed pricing discounts.
- Systematic approaches to encourage waste including refilling too soon or automatic 90-day refill.
- Coverage of high-cost, low-value drugs such as drugs that have less expensive over-the-counter alternatives.
- Replacing drugs eligible for rebates with 340B drugs not eligible for rebates, without passing through the substantially lower price of 340B drugs.
- Narrow definition of “rebates” which allows the PBM to “pocket” 50% or more of the manufacturer revenue because they have been recharacterized as something else.
- Plan sponsors being “held hostage” on any and all PBM contract terms, financial guarantees, and provisions regardless of magnitude of desired benefit changes.
“As the veil continues to be lifted and employers learn more about how the misaligned industry actually works, they must rethink their strategies,” said Russell Dubose, vice president of Human Resources for Phifer, Inc. and a member of the National Alliance’s National Health Purchaser Leadership Council. “This is an excellent resource to educate key stakeholders and use with advisers to overcome market failings.”
The playbook also includes the following strategy recommendations for employers/purchasers:
- Work with partners who work for you – Ensure advisors are independent, qualified and transparent and that contract language requires PBMs to act in your best interest.
- Evaluate and manage with a balanced scorecard – Consider net cost by drug class; waste and appropriateness management; and member affordability, adherence, equity and experience.
- Own the relationship – Take control across the spectrum of claims data, audit rights, contract development and formulary management.
A Playbook for Employers – Addressing Pharmacy Benefit Management Misalignment is publicly available.
About National Alliance of Healthcare Purchaser Coalitions
The National Alliance of Healthcare Purchaser Coalitions (National Alliance) is the only nonprofit, purchaser-aligned organization with a national and regional structure dedicated to driving health and healthcare value across the country. Its members represent private and public sector, nonprofit, and Taft-Hartley organizations, and more than 45 million Americans, spending over $400 billion annually on healthcare. To learn more, visit nationalalliancehealth.org and connect on Twitter and LinkedIn.
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