HARDCORE PBM CONTRACTING TIPS

Plan sponsors often incorrectly view purchasing health care as contracting with a vendor or vendors for a finite set of goods and services (including prescription drugs) for a specified cost. But, what in fact a plan sponsor contracts for is simply the right to have another organization administer and manage the plan sponsor’s health care supply chain.

The plan sponsor’s total health care spend will be determined by the cumulative actions of a number of stakeholders unrelated to the plan sponsor (in particular, its employees, eligible dependents and vendors). These other stakeholders have far different incentives that may not be aligned with the plan sponsor’s concerns about cost and quantity.

Essentially, plan sponsors are not providing their employees with a “Health Care Benefit’, but rather with what tends to become a ‘Health Care Blank Check.’ The plan sponsor’s best recourse to manage this “blank check” with pharmacy benefit managers is by modifying the PBM Services Agreement to deliver radical transparency.

Want practical tips and real-world examples to include in your next PBM Services Agreement? Simply click the big blue button below.