Pharmacy Benefit Management
- Important Pharmacy Benefit Management Facts
- Cost Containment Tools of the Pharmacy Benefit Management Industry
- What do Purchasers need to know about selecting a PBMO?
- How can consumers help contain pharmacy drug costs?
The top U.S. healthcare costs are hospital care (31%), physician and clinical services (22%), and pharmaceutical drugs (11%). Today over 95% of consumers with pharmaceutical drug benefits receive these benefits through a Pharmacy Benefit Management Organization (PBMO). As a result, today employers need to evaluate their pharmacy benefit manager whether it is part or affiliated with their health plan or a separate organization. This paper discusses the following key areas regarding pharmacy drug benefits:
- What questions should purchasers ask about their PBMO?
- What tools should purchasers give consumers to help contain pharmacy benefit costs?
Important Pharmacy Benefit Management Facts
| Pharmacy Benefit Management Facts | |
|---|---|
| 1 | Americans spend nearly $200 billion a year on prescriptions. This dollar amount has increased 4 ½ times since 1990. |
| 2 | By 2015, it is projected that about $450 billion dollars will be spent on prescriptions. |
| 3 | 95% of consumers with pharmaceutical drug benefits receive these benefits through a PBMO. |
| 4 | According to a Health Affairs article, 2004 prescription drug spending slowed to its lowest rate in the past 10 years, a rise in 8.2% but still greater than the overall healthcare cost growth rate for the same period (7.9%) . This slow down is attributed to:
|
As reported in various studies by the Pharmaceutical Care Management Association (PCMA), the Government Accountability Office, the Congressional Budget Office, and the Federal Trade Commission, as well as private-sector experts such as PricewaterhouseCoopers (PwC), the tools and techniques pioneered by the PBMOs typically reduce costs about twenty-five percent (25%) and also help expand access, promote quality, and improve outcomes. Prescription drug cost containment is achieved through a variety of methods as described in the next section:
Cost Containment Tools of the Pharmacy Benefit Management Industry
| Tool | Description |
|---|---|
| Formulary Management | Formulary design, drug utilization facilitated by real-time claims adjudication, step-therapy, and patient and physician education programs. |
| Point of Service Drug Utilization Review | Concurrent online editing system that evaluates prescription drug claims for several types of potential drug interactions, eligibility, and benefit coverage. |
| Rebate Negotiations | Pharmaceutical manufacturers may give monetary rebates for inclusion of drugs on formularies and the impact this inclusion has on increasing their market share. |
| Pharmacy Network Discounts | Negotiations with pharmacies for discounts below the usual price or published benchmark (e.g. “AWP”) price of brand name and generic drugs. |
| Cost Sharing with Consumers | Drug benefit design including plan limits, exclusions and co-payments or coinsurance. Also, cost sharing occurs by designating tiered co-payments such as a lower co-payment for generic drugs than for brand name drugs. |
| Mail-service Pharmacies | Mail-service pharmacies can fill prescriptions for chronic conditions at a lower cost. Many PBMO clients pass the savings on to the consumer by reducing co-payments for prescriptions filled through mail-service. |
| Therapeutic Equivalency Programs | Therapeutic equivalency drug substitutions suggested at the retail pharmacy or by the mail-service pharmacy, but require a consultation with the consumer’s physicians before any drug substitution is made. |
| Disease Management Programs | Identify and stratify consumers or PBMO client’s constituents with chronic medical conditions and assign a treatment protocol to support them and improve their condition. |
| Retrospective review | Review conducted after prescription services have been provided to the patient. |
What do Purchasers need to know about selecting a PBMO?
Health Plans and PBMOs have done an effective job at containing costs, but nation-wide standards do not exist for pharmacy benefit management. URAC is working with industry stakeholders to develop a set of industry standards to assist employers and others with the operational and quality review of pharmacy benefit management programs. These standards and an industry accreditation process will be available in 2007. Here are some of the areas the standards will cover and the questions that will be answered:
| Subject | Some Important Questions |
|---|---|
| Organizational Integrity | Does the PBMO have an organizational structure in place and adhere to its company policies? Does the PBMO have adequate privacy/security processes regarding member information in place? Is there a disaster recovery plan? Is there a continuous quality improvement plan and compliance process? |
| Customer Service Communication/Disclosure | Does the PBMO have the capacity to disclose to and educate the member on how to best maximize their benefit as well as contain costs? Is member literature about the benefit at the right reading level and is it culturally sensitive? Does the PBMO provide members adequate access through the web and member service call centers? |
| Pharmacy Distribution Channels | Does your PBMO meet industry access standards for retail pharmacies? Are pharmacies credentialed? How well does the mail service perform?Does the claims operation meet healthcare industry standards? |
| Drug Use Management | What utilization guidelines are followed and do they adhere to them? What is the therapeutic interchange (Generic, Brand) policy? How is over/under utilization monitored and managed? |
| Formulary/P&T Committee | Does the formulary have a sound clinical basis? Are the members of the P&T Committee qualified and free of conflicts of interest? Does the PBMO have a formulary management process for transitional situations experienced by plan members? |
| Medication Therapy Management | Does the PBMO offer a medication therapy management program that strives to optimize therapeutic outcomes for people with chronic illnesses (such as improving medication use, reducing adverse drug interactions, etc.)? |
How can consumers help contain pharmacy drug costs?
The first step is being an informed purchaser and selecting the PBMO that has an effective management structure for containing costs as well as assists the purchaser in engaging and empowering consumers to use the drug benefit in an informed and accountable way. Here are some consumer empowerment support qualities to look for in a PBMO:
- Benefit designs with appropriate cost sharing incentives for lower cost drugs and services such as generic drug selection and mail service use.
- Decision tools for employees so they can evaluate their options.
- Disclosure of financial transactions so there is an understanding how PBMO third party relationships benefit the plan and employee.
- Consumer education that supports the use of appropriate lower cost drugs, discourages waste and abuse, and reduces drug dependency.
- Integration of the pharmacy benefit program with care management coordination so there is an opportunity for reducing medical errors and supporting early interventions.