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Tips for Negotiating a PBM Contract

Understanding pharmacy benefit manager contracts can be a challenge. Here are some tips to help employers cut through PBM terminology and mechanics.

October 14, 2013

Understanding pharmacy benefit manager contracts can be a challenge. Here are some tips to help employers cut through PBM terminology and mechanics.

·       Define brand and generic drugs — Require the PBM to classify brand and generic drugs based on a national pharmaceutical market research service, such as First DataBank and ask for specific coding requirements.

·       Defining ‘claims’ — Propose language that specifies that claims will not include duplicate, reversed, or rejected claims to ensure that the PBM reimburses when money is due and will not overcharge on processing fees.

·       Understanding prices — Require the PBM to explain pricing methodologies for all of its covered drugs.

·       Conflicts of interest — Ask the PBM to disclose financial arrangements with drug manufacturers, like rebates, and with pharmacies and other interests.

·       Receiving rebates — Ask the PBM to identify and pass along all sources of rebates.

·       Audits — Establish a method to review the PBM’s performance.

·       Short contracts — Review or renegotiate your PBM contract every two years.

·       Classifying specialty drugs — Obtain a list of the PBM’s specialty drugs and request approval rights before changes are made to the list.

·       Mail order and specialty drugs — Many PBMs operate their own mail-order pharmacy. Ask that the price you pay for a mail-order or specialty drug is the same as what the PBM pays. If the PBM refuses, ask to see the price difference between your costs and the reimbursement received by the mail order pharmacy.  If that fails, negotiate for lower administrative fees.

·       Fee breakdown — Ask for an explanation of the PBM’s administrative fees. Some charge a flat fee for all services and others charge individual fees.

·       Copays — Copays should not be higher than the cost charged by the pharmacy.

·       Plan updates — Ask your PBM to update the plan on a quarterly basis as new drugs enter the marketplace.

Source: Contracting Negotiating Tool: Information on Contracts With Pharmacy Benefit Managers, Pharmacists United for Truth and Transparency and Georgetown University’s Harrison Institute for Public Law, 2012

Rita Pyrillis is Workforce’s senior editor. Comment below or email editors@workforce.com. Follow Pyrillis on Twitter at @RitaPyrillis.