Patient care implications of drug benefit contracting 

April 07, 2022

Pharmacy benefit manager (PBMs) and carrier procurements, market checks, and renewals have grown increasingly complex. Today, procurement negotiations for pricing terms may need to factor in as many as 400 financial variables – or even more – due to the multi-layered variations of discounts, fees, and rebates. Addressing these complexities requires additional modeling, more time to understand offers, and significantly more negotiation efforts. In our experience, the intensity of the work we perform for plan sponsors has nearly tripled over the past five years.

It’s important for plan sponsors to understand that drug pricing negotiations are no longer straightforward financial exercises, but now also have implications for patient care and multiple layers of clinical interdependencies.  Contracting is no longer just about getting better pricing and determining patient disruption associated with copay tiers. Almost all vendors provide multiple formulary options with growing numbers of drug exclusions. Many formulary strategies now also weave in additional utilization management programs such as precertification strategies. Sponsors that did not embrace step therapy or prior authorization strategies in the past may now need to incorporate them into their benefits to align with the vendor’s formulary. Even independent of the formulary process, sponsors need to account for the differences in support that PBMs or carriers y provide in terms of clinical programs. With the great majority of sponsors leveraging some type of drug authorization programs, factors like medication targets, criteria, ROI, and increasingly separate fees must be accounted for when comparing vendors’ proposed offers. 

Finally, as sponsors look to minimize patient care disruption when switching vendors or even renewing with their incumbent, they now need to factor in many additional drug lists that define contributions and where patient can access a drug. Vendors may have multiple preventive drug lists, as well as lists that define if a drug must be filled at specific pharmacies or distributed from different sites of care. The challenge of addressing these factors extends beyond the pharmacy benefit: An increasing amount of drug spend, in particular specialty drug spend, occurs under the medical benefit even if the pharmacy benefit is carved out. So as medical carriers look to manage medical drug spend and leverage tactics once seen only under the pharmacy benefit, many of the same patient care implications must be accounted for in medical benefit negotiations.   

To ensure these critical clinical implications are addressed, Mercer leverages the expertise our clinical pharmacists. We believe that only by having clinicians involved in these types of negotiations can we accurately reflect the patient care implications of vendors’ proposals -- and take action to minimize unwanted surprises for both the plan sponsor and patients.

Raymond Brown
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