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PBM Benefit Insights

Are you “Passing Thru” unnecessary risk on your PBM contract?

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.

Example: Drug A is processed at three retail pharmacies. It has an Average Wholesale Price (AWP) of $500 and a member copay of $0 in this scenario. The overall average price and AWP discount for Drug A at three different pharmacies is $438.33/AWP-12.4%.

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.


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