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.
All too often, health plan decision makers are convinced that they are getting the best possible pharmacy deal by opting for a “pass-thru” PBM, as opposed to a “traditional” model. The simplicity of the pass-through concept makes it easier for a PBM to frame it as a good deal, when it’s often not advisable. The idea is that the PBM will transfer, or “pass thru” their network discounts, rebates and general PBM services for one simple administrative fee, typically calculated as Per Member Per Month (PMPM). So, where is the risk you ask?
The Network:
The PBM passes along their network discounts as they are, with no adjustments. This solution does not make sense for rural areas and organizations that have nationwide employees.
The Solution:
A traditional contract allows you, the health plan decision maker, to negotiate a guaranteed AWP discount across the entire network. If the PBM is at risk of not hitting the AWP discounts (especially at the small chain/independent pharmacies), the PBM is obligated to actively renegotiate low-performing network contracts.
If we revisit the example above, using a traditional model and applying a flat AWP of 14.5%, we see an overall average price of $427.50 and an overall savings of $32.49 to plan.
This better positions the payor to underwrite the policy and provide budgeting forecasts.
We invite you to talk to an APC Pharmacy Benefits Consultant for help with contracting and plan design to minimize potentially unforeseen bumps in the road to a successfully managed benefit.
