A majority of employers believe that their contracts withpharmacy benefit managers are too complex and lack transparency, and they wish that PBMswould focus less on rebates and more on discounts and value-basedinsurance design, according to interviews with experts that servedas the basis of a survey of 88 “jumbo” employers.

The results of the survey, as well as follow-up employerrecommendations for PBMs, were detailed in the study, “Toward Better Value: Employer Perspectives on What'sWrong With the Management of Prescription Drug Benefits and How toFix It,” conducted by Benfield, a division of Gallagher BenefitServices, on behalf of the National Pharmaceutical Council.

Related: Pharmacy benefits ripe fortransformation?

A majority (63 percent) of the respondents say that PBMs are nottransparent about how they make money. Only 30 percent say theyunderstand the details of their PBM contracts, and slightly more(40 percent) say they fully understand their PBMs' performanceguarantees.

Says one respondent in charge of a corporate HR shared services:“Supposedly, PBMs make their profit by charging employersadministrative fees. If that were the case, theoretically, PBMswould be making nothing. But PBMs’ reported profits are so high. Itshows that they are making money in ways that are notdisclosed.”

More than half (58 percent) of employers think that PBMcontracts are overly complicated, are ambiguously worded, and oftenbenefit the PBM at the expense of the employer. Utilizing clearerdefinitions and simplifying the contracts were among employers'recommendations for improvement.

“It’s hard to know if you are maximizing the value of your PBMcontract,” says another respondent who is a director of benefits.“It’s very conflicting and confusing. There are so many ways tocontract with PBMs. There is no standard way.”

Experts who participated in preliminary interviews say thatemployers should consider obtaining the help of externalconsultants who have expertise in PBM contracting. Eighty-sixpercent of respondents rely on assistance from either theirbenefits advisor (48 percent) or a separate consultant withspecific expertise in pharmacy benefits (38 percent).

“I know I’m getting good consulting advice when the consultantsees opportunities I hadn’t identified and when a consultantdemonstrates deep knowledge and experience executing contracts,”says a former managing director of health strategy andresources.

“If I knew I wasn’t getting good advice, I would ask for a newconsultant,” the respondent adds. “One warning sign is when theconsultant makes too strong a recommendation, rather than giving methe data to make a decision.”

Other survey findings include:

• A majority of employers (69 percent) say that they would welcomean alternative to rebates, such as discounts or point-of-salerebates, in which patient payments reflect a post-rebate price.Employers acknowledged focusing on rebates as a revenue streamrather than focusing their attention on other important factorssuch as reducing employee co-insurance or deductible payments, orproviding access to the most effective medicines.

• Employers want to understand the rationale behind PBMs’formulary and exclusionary list decisions, such as the clinical,financial and economic impacts; 50 percent of employers surveyedthink PBMs lack transparency about the basis for those decisions.Possible solutions suggested by employers include using value-basedinsurance design, where high-value drugs cost patients less thanlow-value drugs, or payments based on the effectiveness of adrug.

The results of the survey show that that there is “room forimprovement” in how employers and their PBMs communicate with eachother, says Benfield area president Chuck Reynolds.

“And what is interesting – though perhaps not surprising – isthat our analysis indicates employers that are more activelyengaged in managing their prescription benefits tend to be moretrusting of and satisfied with their PBM vendors,” Reynolds says.“We speculate this is because more engaged employers valueprescription benefits more highly, communicate their expectationsmore clearly, and work more diligently with their PBM vendors toget rid of ambiguous contract language and assure alignment betweenPBM services and total value.”

In conjunction with the study, Benfield and the NationalPharmaceutical Council developed tools to assist employers with thePBM assessment process. Available on NPC’s website, these toolsinclude: the PBM Relationship Segmentation tool, whichprovides employers with the ability to quickly assess where theystand with their PBM on satisfaction and trust versus engagement;and the Improving Prescription Drug Benefit Supporttool, which helps employers assess the value they are receivingfrom their consultants and how engaged and organization is withtheir consultants.