18% reduction in gross pharmacy costs by implementing a transparent PBM contract
Client: Fortune 50 Company
Overview
The benefits team of a Fortune 50 company was concerned that their existing PBM contract lacked full transparency, with an unclear profit margin. They sought a unique PBM contract that would provide certainty and auditability over time, allowing them to clearly understand and validate how prescription drugs were priced.
Challenges
- Lack of transparency in the existing PBM contract.
- Unacceptable profit margins with limited auditability.
- Need for a contract structure that ensured fair and predictable pricing for prescription drugs.
Solution
To address these concerns, a competitive PBM RFP process was initiated with strict minimum bid requirements. The resulting contract included several innovative provisions designed to enhance transparency and cost efficiency:
- Acquisition cost plus for medications at Mail and Specialty channels.
- Pass-through pricing at the Retail network.
- 100% pass-through of monies from Pharma beyond the definition of rebates.
- A margin cap agreed upon by both the Plan and the PBM.
- Full audit rights to confirm the margin cap percentage.
Results
The new PBM contract delivered significant financial and operational benefits, including:
- 18% savings on gross pharmacy costs.
- Increased transparency and auditability in drug pricing.
- More predictable and fair pricing structures for prescription medications.
- Stronger financial oversight through full audit rights.
