A majority of employers believe that their contracts with pharmacy benefit managers are too complex and lack transparency, and they wish that PBMs would focus less on rebates and more on discounts and value-based insurance design, according to interviews with experts that served as the basis of a survey of 88 “jumbo” employers.

The results of the survey, as well as follow-up employer recommendations for PBMs, were detailed in the study, “Toward Better Value: Employer Perspectives on What's Wrong With the Management of Prescription Drug Benefits and How to Fix It,” conducted by Benfield, a division of Gallagher Benefit Services, on behalf of the National Pharmaceutical Council.

A majority (63 percent) of the respondents say that PBMs are not transparent about how they make money. Only 30 percent say they understand the details of their PBM contracts, and slightly more (40 percent) say they fully understand their PBMs' performance guarantees.

Says one respondent in charge of a corporate HR shared services: “Supposedly, PBMs make their profit by charging employers administrative fees. If that were the case, theoretically, PBMs would be making nothing. But PBMs’ reported profits are so high. It shows that they are making money in ways that are not disclosed.”

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

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

Experts who participated in preliminary interviews say that employers should consider obtaining the help of external consultants who have expertise in PBM contracting. Eighty-six percent of respondents rely on assistance from either their benefits advisor (48 percent) or a separate consultant with specific expertise in pharmacy benefits (38 percent).

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

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

Other survey findings include:

A majority of employers (69 percent) say that they would welcome an alternative to rebates, such as discounts or point-of-sale rebates, in which patient payments reflect a post-rebate price. Employers acknowledged focusing on rebates as a revenue stream rather than focusing their attention on other important factors such as reducing employee co-insurance or deductible payments, or providing 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 surveyed think PBMs lack transparency about the basis for those decisions. Possible solutions suggested by employers include using value-based insurance design, where high-value drugs cost patients less than low-value drugs, or payments based on the effectiveness of a drug.

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

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

In conjunction with the study, Benfield and the National Pharmaceutical Council developed tools to assist employers with the PBM assessment process. Available on NPC’s website, these tools include: the PBM Relationship Segmentation tool, which provides employers with the ability to quickly assess where they stand with their PBM on satisfaction and trust versus engagement; and the Improving Prescription Drug Benefit Support tool, which helps employers assess the value they are receiving from their consultants and how engaged and organization is with their consultants.

Instant Insights /

What do employers think of prescription drug benefits?

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