As PBM RFP Season Begins, Expert Urges Health Plans to Focus on Contracts

Share Article

To decrease and control their prescription costs, Pharmacy Benefit Consultants' President recommends all health plans single-mindedly focus on their PBM contracts and entirely change their prescription coverage relationship with PBMs. RFP questionnaires accomplish almost nothing, other than allowing PBMs to make representations they will likely later ignore.

News Image

New Article Provides PBM Contracting Advice

If your PBM contract allows your PBM to price generic drugs based on MAC, your PBM contract needs to be scrapped.

Recognizing that Health Plan executives are beginning to make plans to conduct PBM RFPs, a nationally recognized PBM expert has spoken out to urge executives to use their RFP leverage to change their PBM contracts, not ask useless questions in RFP questionnaires.

"If you focus on writing airtight contract definitions for every key term - like 'Brand Drug' and 'Generic Drug' and 'Specialty Drug' - and ensuring that every dispensed drug has a financial guarantee controlling its invoiced price - your RFP will definitely result in lower prescription coverage costs," says Linda Cahn, head of Pharmacy Benefit Consultants. "But if you focus on generating a more extensive RFP Questionnaire, you'll accomplish absolutely nothing with your RFP," warns Cahn.

Cahn knows of what she speaks, since her consulting firm has conducted numerous contract-focused RFPs in recent years for corporations, unions, government entities and insurance companies. And her firm has saved its clients tens of millions of dollars when doing so by dramatically changing the clients' PBM contract terms.

She's also detailed in a recent article in the IFEBP's prestigious Benefits Magazine the steps that every Health Plan must take to use its RFP leverage to extract an entirely different form of contract.

The article - captioned "Eliminate All PBM Contract Loopholes" - outlines basic contracting concepts that every health plan can implement. It also provides detailed contract recommendations related to 7 substantive areas: (i) drafting airtight contract definitions; (ii) obtaining real (not fake) pass-through pricing; (iii) writing meaningful financial guarantees; (iv) ensuring a pass-through of 100% of all third party financial benefits (not just rebates from drug manufacturers); (v) mandating real transparency and complete audit rights; (vi) creating re-negotiation and carve-out rights that currently don't exist, and changing contract termination rights; and (vii) eliminating "savings program" loopholes.

Cahn urges every HR executive, general counsel and insurance company team to begin this new year by examining the company's existing PBM contract and identifying every 'loophole' that's allowing PBMs to overcharge for drugs.

"Ask yourself," suggests Cahn, "Does my contract's definition for 'Specialty Drug' cross-reference to a list of every Specialty Drug in the marketplace. Or does it instead loosely describe Specialty Drugs as 'any drug that may require special handling' (a meaningless definition)?" Cahn adds that every PBM contract must also contain a "default discount guarantee" for new-to-market Specialty Drugs, lest PBMs charge whatever they want every time a new high-cost drug enters the market.

Cahn also recommends: "Look at your financial guarantees and make that sure each guarantee identifies which drugs must be included - and excluded - from the guarantee." Otherwise, adds Cahn, "when you conduct an audit, your auditor will include certain drugs in a guarantee - and your PBM will claim they should be excluded - and you'll never recoup the amounts you were overcharged!"

Cahn also tells plans to search their existing contracts for MAC terms: "If your PBM contract allows your PBM to price generic drugs based on MAC, your PBM contract needs to be scrapped," says Cahn. "After all, MAC pricing allows a PBM to create any invoiced prices the PBM wants to create, and change those prices whenever the PBM wants to change them."

Cahn also notes that in these tough economic times when everyone's health care costs are spiraling out of control, no health plan can afford to hemorrhage money from a PBM contract that's stuffed with dozens of unidentified loopholes. Accordingly, she urges every health plan executive to examine its PBM contract, take the steps to conduct a RFP, and then make sure that the RFP focuses not on getting answers to mega-page questionnaires, but rather on drafting and obtaining a loophole-free contract that will control and decrease their future costs.

For further information, interested parties should feel free to contact Linda Cahn at Pharmacy Benefit Consultants. Phone: 973 975-0900. Email: LindaCahn(at)mac(dot)com.

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Linda Cahn
Visit website