How employers can seek greater value from their PBMs

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How’s it going with your PBM? Does it feel like their business model is aligned with the interests of your organization, employees and families? Are they doing a great job executing on the things that are most important to you? Do you trust them as much as you’d like to trust a vendor charged with such a critical role? Do recent acquisition announcements — including this week’s news of Cigna and Express Scripts — have you believing your organization will get better value for money spent on prescription drugs if your PBM is acquired by (or acquires) a major health plan?

If you struggle to answer yes to these questions, take heart in knowing that research conducted by Benfield, a division of Gallagher Benefit Services, with employers indicates that a.) you’re not alone; and b.) there are steps you can take to get to a place of better alignment, satisfaction, trust and value for money spent on prescription benefits.

Employers value the functions that PBMs perform. From negotiating with drug manufacturers, to implementing tactics that improve health by supporting drug adherence and assuring patients are prescribed the most effective treatments, a strong majority of employers rate PBM functions as highly important. However, perceptions of the importance of PBM functions are not matched by how employers feel about their PBM vendor. Consider these findings:

· Just 33% of employers believe the business model of their PBM is strongly aligned with the interests of their company and its employees.
· Only 35% of employers rate their PBM as very trustworthy.
· A sparse 37% of employers indicate that they are very satisfied with the overall performance of their PBM and — with the exception of maintaining pharmacy networks — vendor performance does not match the importance of critical functions.

The elephants in the room

Analysis of the research we conducted surfaced three persistent and related concerns:

1. Complexity of the PBM business model and contracts: 58% of respondents agree that “Contracts are overly complicated and often harbor clauses that benefit the PBM at the expense of the employer or patient”

2. Lack of transparency about money flows and formulary decisions: 63% of respondents agree that “PBMs lack transparency about how they make money”

3. Rebates, and perverse incentives that rebates can introduce into the PBM business model: 69% of respondents indicate “their company would welcome an alternative to a rebate-driven approach to managing pharmacy benefit costs”

Employers need help confronting these elephants in the room. Pre- and post-survey interviews with employers and consultants emphasized the importance of thinking about transparency, complexity and rebates as interrelated challenges that work together to preserve the status quo. Clearly, addressing these challenges requires that employers invest significant time, energy and mental bandwidth in understanding and managing their PBM. In reality, most employers are not making these investments. Consider:

· Just 40% of respondents indicate they fully understand their PBM’s performance guarantees.
· Only 30% say they fully understand the details of the contract they have with their PBM.
· Just 22% agree that they’ve spent hours reading and understanding their PBM contract.

Given the findings above, it’s not surprising that 86% of employers rely on consultants for support in managing their PBM. Unfortunately for many employers, the quality of that support is suspect. For instance, just 56% of survey respondents indicate their consultant works throughout the course of the year to monitor and help manage PBM performance, and only 56% say their consultant has identified problematic issues in their PBM contracts (experts say issues almost always exist).These weaknesses may be pinned on the consultant, or it may be that the employer isn’t engaging their consultant to do the things they need to do, but the bottom line is that employers need help that, too often, they’re not getting.

The path toward better value

A cross-tab analysis was conducted to better understand what set employers who trusted and were satisfied with their PBM relationships apart from their peers. The analysis identified a relationship between trust and satisfaction and employer engagement, meaning: as employers become more engaged in the management of their prescription benefits, it becomes more likely that they will trust and be satisfied with their PBM.

While this relationship in our data is modest, it was fortified by interview findings that emphasized the need for employers to be tenacious, well-informed and demanding customers, not afraid to confront complexity, transparency and rebates and willing to walk away from vendors that won’t engage as partners in improving value.

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