PBM Contracting

1
PBM Contracting

• Pharmacy Benefits Academy
• October 2008

Optimizing patient care and reducing pharmacy
plan costs using technology, clinical
interventions and unbiased consulting services.
2
Agenda

• The Five Steps to PBM Contracting Success
• Develop your own contract
• Define EVERYTHING
• Understand your rights to audit
• Document all pricing terms
• Get Help
• Questions

3
Step One Start with your contract

• Develop a contract that represents your interests
• PBM contracts generally favor the interest of the
  PBM
• A red flag should be when your PBM refuses to
  even review your contract

4
What do you expect from the PBM

• Include the 7 Ms
• eligibility management
• plan design management
• payment and funding management
• account management
• network management
• clinical/rebate/formulary management
• information management

5
Include what you do for the PBM

• Plan design information
• Eligibility information
• Member inquiries
• Payment processes

6
Do you have special needs?

• Include any special needs
• Reporting
• Accounting
• Mail order
• Specialty pharmacy
• Fraud, Waste and Abuse programs
• Medicare Part D Services

7
Step Two Define EVERYTHING

• MAC pricing
• Brand and generic drugs
• Rebates
• Transparency
• Paid Claims
• AWP, WAC, AMP

8
Rebates

• What are they.all Financial Benefits
• Base
• Marketshare
• Cost effectiveness
• Sales targets
• Disease management
• Administrative Fees
• Prompt pay discounts
• Data selling fees

9
Step Three Audit Rights

• Key audit terms to watch out for
• Mutually Acceptable Auditor
• Non-Disclosure Agreements
• Scope of the Audit
• The audit rights will tell you how transparent
  the relationship is.disclosure is not
  transparent

10
Step Four Document all pricing terms

• Brand and Discounts rates
• What is a branded generic?
• All venues
• Retail, mail, specialty, long term care, home
  infusion
• All types
• Compounds, ALL specialty drugs
• Integrated medical/pharmacy contracts need to
  document the pharmacy rates

11
Pass Through or Transparent

• There is a difference
• Pass through refers to no spread at retail, mail
  order, specialty or no rebate spread
• Transparency is the PBM discloses what you arent
  getting paid
• Clearly define in your contract where you are in
  this line in the sand

12
My .02 on Performance Standards

• Every PBM meets every performance standard
• If things are so bad, you need an out clause
• Termination clauses are difficult to get in this
  business but you need them
• 30 day for cause, 180 day for no cause, three
  year term

13
Step Five Get Help

• Internal resources
• Get your legal department involved up front not
  at the back end
• External legal and consultant help
• Even the local pharmacist can help
• Plan on a three month process
• Gain consensus internally

14
Conclusions

• Do not rely on your PBM to provide contract terms
  that will favor you versus the PBMs business
  model
• Developing your own contract may be painful but
  will end up saving you money
• Review and document everything