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Navigating the world of pharmacy benefits can be complex. Having the right information makes a big difference in managing your organization’s and its members’ healthcare costs. Pharmacy Benefit Managers (PBMs) play a crucial role in this process, but it is important to understand how they operate and impact your plan’s benefits.
Here are five key questions to ask your PBM to ensure you are getting the most out of your prescription drug coverage provider.
1. How do you determine the formulary for prescription drugs?
A formulary is a list of covered drugs and their respective price tiers. Understanding how your PBM structures the formulary can help employers manage prescription costs more effectively.
Generic medications contain the same active ingredients as brand-name drugs but are sold at a lower price due to reduced development and marketing costs. A client-centric formulary will likely include generics in lower tiers, resulting in lower out-of-pocket costs for members.
Recently developed biosimilars are highly similar to approved biologic drugs in efficacy, safety, and quality, but are also generally less expensive. Likewise, formularies developed with clients and members in mind will include biosimilars.
Some larger traditional PBMs are incentivized to push products that provide them with higher rebates from drug manufacturers. Because they keep a portion of those rebates, putting those drugs on the formulary is important to their bottom line.
Alternatively, by favoring generics and biosimilars on their formulary, PBMs can offer more affordable medication options and help reduce prescription drug costs. Ask your PBM how they evaluate and update their formulary, including placement of generics and biosimilars. Their goal should be to deliver the most clinically effective, lowest net cost medications to reduce per member per month (PMPM) costs for clients, while providing patients with access to the healthcare products they need.
2. How do you handle rebates from drug manufacturers?
Differences in clinical strategies among PBMs often stem from their financial incentives. Some PBMs are motivated by higher rebates from drug manufacturers as they develop their formularies. They may prefer drugs that offer high rebates as they retain a portion of them, which is crucial for their profitability. However, the PBM’s financial benefits are not often disclosed to, or fully auditable by, clients.
In contrast, a transparent PBM like EpiphanyRx focuses on the lowest net cost for clients and members, with rebates passed through at 100%. This approach leads to a formulary that emphasizes low-cost generics and biosimilars, alongside affordable brand options. Rebates are passed through entirely, ensuring that formulary decisions are based on clinical appropriateness, safety, and overall cost-effectiveness.
Low-net-cost strategies include:
- Adding generic substitutes for brand-name medications
- Incorporating biosimilars into the formulary
- Removing expensive drugs in favor of less costly alternatives
- Avoiding trendy and overpriced “me too” medications that offer no additional clinical value
- Implementing utilization management to encourage cost-effective medication use
- Limiting specialty drugs to a 30-day supply to prevent waste
PBMs often negotiate directly with drug manufacturers to secure lower prices or rebates. It is important to know how these negotiations impact your costs. Inquire about the transparency of these negotiations and whether any savings from rebates are passed on to you or used to benefit the plan. This can help you assess whether the PBM is working in your best interest.
3. How do you support members to minimize disruption?
A good PBM supports members in minimizing disruption during transitions by prioritizing clear communication and personalized assistance. Key practices include dedicated implementation efforts to address unique member needs, detailed letters providing advance notification about changes, and ongoing clinical support from pharmacists.
PBMs can facilitate seamless transitions during implementation by working with out-of-network pharmacies to get them credentialed and allowing members time to move their prescriptions. Offering tailored services, such as concierge support, can guide members and their prescribers through the process, ensuring that most members experience little to no negative changes to their medication access.
4. How are pharmacy network discounts handled and what pharmacy network options do you offer?
Oftentimes, PBMs benefit from spread revenue by retaining a portion of drug costs, including ingredient costs, dispensing fees, and Usual and Customary (U&C) prices. By implementing this “spread”, their clients end up being charged more than the amount reimbursed by the PBM to the pharmacy.
On the other hand, a transparent PBM provides 100% pass-through on pharmacy network reimbursement rates, with no additional fee and zero spread retention. The result is that plan sponsors and members benefit from the fully contracted discount. Ask your PBM if you are getting the full pharmacy network discount or if they are retaining a portion.
In addition, it’s important to have the right pharmacy network to best meet your organization’s specific needs, including several options to choose from. For example, EpiphanyRx offers three network options, ranging from greater pharmacy access to greater savings, with a middle option that includes a balanced combination of both.
Ask if your PBM provides options such as:
- A network anchored by a major pharmacy chain, ensuring easy access for most members
- A network guiding members to specific chains for 90-day prescriptions while maintaining broad access for 30-day prescriptions
- A mail-order pharmacy for 90-day maintenance medications
- A specialty pharmacy for chronic conditions
5. What is your strategy for minimizing specialty costs?
Specialty medications, or medications that treat complex, chronic, or rare conditions, may require patients to use a specialty pharmacy. It is important to note if your current PBM receives additional revenue from specialty pharmacy, which could lead to even more expensive, often prohibitive, prescription costs for members.
The PBM may drive members to their pharmacy unnecessarily, autofill, or overfill prescriptions in order to profit from patients. Ask your PBM how they help manage pharmacy costs for their clients and members, including how they prevent waste.
With a transparent approach, such as EpiphanyRx’s model, the PBM does not receive additional revenue from specialty utilization. Instead, clients pay the actual cost of the specialty drug, plus a flat patient management fee and shipping cost. This innovative cost-plus approach has been in practice for over ten years by Lumicera Health Services, the specialty pharmacy partner of EpiphanyRx.
We also recommend asking your PBM what kind of specialty management programs they offer. For example, ask:
- Do they offer programs that connect members to copay assistance or patient assistance options?
- Do they offer a program that moves coverage of select specialty drugs from the medical to the pharmacy benefit for better management and savings?
- Do they offer these programs in-house, or do they out-source for additional fees?
- Do clinicians routinely speak with members about their condition(s) and ask if their specialty medication has led to symptom improvement?
By asking these questions, you can gain a clearer understanding of how your PBM operates and how their policies impact your organization’s costs alongside members’ prescription drug coverage. Being informed is the first step toward making better healthcare decisions and helping your members save money on the medications they need to lead healthy lives.
To ask us these questions and more, contact Jonathan Har-Even, VP of Sales, at jonathan.har-even@epiphanyrx.com or request a proposal by contacting rfp@epiphanyrx.com.