Some organizations may dread the notion of negotiating or renegotiating contract conditions for Pharmacy Benefit Management (PBM) services. Understandably, some people would find the process cumbersome and time-consuming. Alternatively, they worry that switching to a different negotiate with PBM vendor will be complex and rife with implementation hiccups. Other employers may be reluctant to ask for better terms because they think the PBM would become more challenging to work with if they do so.
Because they’re primarily unfounded, the bargaining process for PBM services doesn’t have to be complicated or protracted if you keep a few crucial factors in mind. The following recommendations should assist your company in maximizing your negotiating position for PBM services so you may save time and money.
Make sure to ask for a lower price.
As an employer, you have a legal and financial obligation to seek out the best possible price for PBM services. If you ask for better terms, it will not harm your connection with your PBM or the quality of PBM services you receive. You’ll become a better shopper as a result. That’s a win-win situation for your business and the people who benefit from it.
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Use the RFP process to your advantage.
To keep their clients, PBMs typically offer to extend the contract at terms that are only good enough to keep the client. If you issue an RFP to examine multiple providers, your chances of renewing with your current PBM at a competitive market rate will increase.
Make no assumptions about the existence of superior alternatives.
Many businesses have given PBMs the upper hand in negotiations because of the consolidation of the PBM market. While it’s true that there’s less choice, PBMs can only capture so much new market share before they run out. Your PBM can’t survive without your patronage. This means that if they think your company is dissatisfied with its PBM services or will go out to bid again, they are more likely to make concessions. They would rather keep you than risk losing you.
Avoid long-term PBM service contracts of three and five years.
Many businesses believe that by signing long-term contracts with their PBM, they will be able to negotiate better costs. And many companies don’t want two-year PBM services contracts because they don’t want the administrative labor associated with drafting an RFP every other year. There is a lot of volatility in the PBM services market and its pricing patterns. Therefore, committing to a three-year or five-year term implies you will likely miss out on better prices than would otherwise become available. It is better for you, the employer, to sign a two-year PBM contract with an opportunity to renew in Year 3 at your choice. This puts you in charge and prepares you to capitalize on emerging PBM services market prospects. This strategy also allows you flexibility should other business administration platforms, such as medical carriers or human resources service solutions, necessitate a change or adjustment of priorities.
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Pay close attention to any contract language that mentions PBM market checks.
A common misconception is that “market check” measures will safeguard businesses if better pricing for PBM services becomes available after they are engaged in a PBM contract. This wording, on the other hand, nearly usually favors the PBM. Furthermore, the employer must “show” that the pricing they received is less beneficial than the general market. Always have the option of enlisting the help of outside specialists to conduct market research. If you approach the PBM for numbers, they’ll usually say they can’t reveal financials they consider proprietary because you can’t prove anything without them. As a result, be on the lookout for a negative feedback loop.
Mail service and specialty pharmaceuticals are other important levers to keep in mind.
Prescriptions filled by mail or at one of their approved pharmacies bring in more money for PBMs than those served at a pharmacy on the open market. You have more bargaining power if your business group’s mail service use rate is much higher than the national average of 15%. As for specialized medications, PBMs can make a lot of money there. A PBM-exclusive special agreement gives you more bargaining power when asking for better discounts, so take advantage of this.
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Keep an eye out for PBMs that are just starting.
There are other options besides the three major PBMs. For companies with 10,000 or more employees, contracting for PBM services with smaller “next tier” PBMs will give you more clout. More than 10,000 lives is a big deal for these tiny PBM players. There is a good chance they will lower their prices and provide you with additional benefits in exchange for their cooperation.
Be aware of words like “transparency” and “hybrid pricing,” which have become fashionable.
Although there are a variety of pricing alternatives available in the market, there is no industry standard for “transparent” PBM pricing. Therefore, terminology can be deceptive, and what looks cost-effective may be more expensive for your overall strategy. Remember that regardless of the PBM’s pricing choice, it is all about critical contractual features such as full audit rights and the disclosure of PBM financial terms, irrespective of the PBM’s pricing option.