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PBM Benefit Insights


It is worth evaluating the benefit of using a mid-sized PBM for self-funded entities providing pharmacy benefits to 10,000 or fewer.

The three largest PBMs, who hold over 80% of the industry market primarily focus on larger life group sizes. For smaller groups under 10,000 lives using a large PBM means having to work with a pharmacy benefit coalition.

A coalition is a group of purchasers of pharmacy benefit management services, who facilitate a channel for these large PBMs to aggregate pricing to the small group marketplace. Many coalitions enter into arrangements with their PBM vendors that restrict a plan or consultants’ access to crucial financial data and provide limited formulary and network options. This pre-negotiated offer may benefit a PBM financials and satisfy Wall Street, but often an employer ultimately ends up having limited transparency and restrictions to beneficial features. A small self-funded entity is not positioned for maximum benefit in this environment and can fare significantly better results marketing their plan independent of these aggregation approaches.

Here are some points to consider when evaluating a mid-sized PBM for your self-funded pharmacy plan.

1. Small groups (under 10,000 lives) are important to a mid-size PBM.

Independent mid-sized PBMs are focused on providing top-tier service regardless of a smaller plan size and are more accountable to an increase in a plan's pharmacy trend. A coalition amassing lives for pricing leverage with a large PBM will not be as invested in accommodating the unique needs of a small group with lives that do not significantly move the needle towards their financial advantage. A large PBM plans for client turnover and anticipates loss each year. Bottom line, they will not fight to keep your business when there are no incentives.

2. Mid-size PBMs allow a business more flexibility with their plan. Many small companies run like a large family. Owners and managers are sensitive to how their pharmacy benefit decisions may impact coverage of essential drugs. A mid-sized PBM and a well managed customized contract can provide an organization's unique needs and drug utilization a lot more flexibility.

3. Increased transparency, competitive pricing, and better contract terms with little disruption to your members.

A mid-sized PBM does not mean smaller pharmacy networks or limited formularies. Implementation is generally no more than just switching out a drug card.

Working with APC can connect you to a broader network of mid-sized PBMs.

APC understands that when considering an overwhelming spectrum of healthcare needs, it is easy to overlook the significance of having more control over your pharmacy plan spend. That is why APC wants to be your partner when making important decisions for your under 10,000 life group. Our expertise and industry knowledge can offer competitive pricing and trend management.

An APC partnership provides access to our industry relationships to help you find a PBM that will discount guarantees; one that will continually monitor and negotiate pharmacy contracts to ensure your agreed upon discounts are met, if not exceeded. Through scheduled reviews throughout the year, APC will ensure your PBM partner will be accountable for the plan's trend experience and will provide clinical programs to combat negative trends.


From the onset, drugs are priced by the manufacturer and are influenced by FDA regulations that include exclusivity periods and generic launch delays. During the exclusivity period, drug manufacturers want to solidify their market position by handing out coupons directly to the potential product consumer. This strategy circumvents PBM formularies and bypasses employer-based co-pay structures and yearly deductibles. This strategy enables the drug manufacturer to gain market share for its brand. However, drug manufacturer coupons can work against a plan's strategic prescription benefit choices and possibly even the rebate structure, resulting in increased drug spend.

Towards the end of a brand’s patent life manufacturers will offer rebates to PBM’s for premium formulary placement and can negatively impact your organization’s total drug spend. The benefits from a PBM's rebate decisions may not trickle down to benefit their client's drug spend.

Retail drug pricing begins with what is called the MAC (Maximum Allowable Cost), this is a ceiling cost on most generic medications. For example, Amoxicillin 500mg, a commonly prescribed antibiotic, typically wouldn’t cost an employer a MAC greater than 50 cents per pill.

Retail outlets shop around to use the drug manufacturer with the lowest costs. This makes business sense as it is a necessity to keep operating costs low. However, mail order facilities are not retail outlets, and have different business priorities. Mail order facilities may use just ONE manufacturer which may not always be offering the lowest cost. If they use MAC pricing at all, it is substantially different from retail Mac and it is not uncommon to see a prescription filled at a mail order facility cost 3 times more than retail.

There are alternatives to a Mail Order network that can generate actual plan savings. Let APC negotiate aggressive discounts on the plan’s lowest MAC setting. APC can help design a plan that can provide your members with convenience and true savings across the board.

If you’re unsure what type of networks your PBM will allow or need guidance on choosing a plan that fits, please contact an APC consultant for a complimentary plan review.

Mail order services have always been depicted as a cost reduction strategy for pharmacy plans, but the untold truth is it’s not. While most PBM contracts show a greater discount at mail order, it’s important to note that it is usually a greater discount on a greater cost.

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