Your PBM says they met their guarantees, but did they save you money?

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January 4, 2022

We have previously discussed the standard methods used to evaluate PBMs and how contract definitions can impact PBM accountability in complex ways.

In addition to contract definitions, another critical aspect to driving PBM accountability is understanding drug utilization mix. If you evaluate PBM performance using aggregate pharmacy network discounts and rebate payments (which is the standard, but flawed, method in the industry), you create an incentive for your PBM to focus less on controlling cost and more on increasing utilization of "guarantee-rich products".  Confusingly, your PBM can improve their network discounts and rebate performance by increasing your plan costs!

Let's unpack this.  First, we need to understand what a "guarantee-rich product" is.  This would be any medication with a greater-than-average pharmacy network discount or rebate payment. By increasing utilization of these products the PBM improves their position on guarantees, but actually drives plan costs up, because these are high-cost drugs.  Discount and rebate "performance" improves, but plan costs increase.

To better understand this dynamic, let's look at a specific guarantee-rich product, Humira.  As illustrated in the schematic below, putting a high-cost drug like Humira on the plan actually improves discount and rebate performance, even while increasing plan cost.

Guarantee Rich Product Example

So how do you avoid this incentive misalignment?

  1. Work with a PBM that prioritizes actual plan cost savings, not "game-able" guarantees.
  2. Work with a PBM that is 100% pass-through and therefore won't have conflicts of interests which mean higher cost drugs for you translate to higher margins for them.

At SmithRx, we are always 100% pass-through and we focus on practical metrics that help you understand if you are actually saving money: plan costs over time, per-member per-month (PMPM) plan cost, and per-claim costs.  We provide the data and analytics to help you understand what's really going on with your pharmacy spend, and actively help you reduce it.

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A new type of pharmacy benefits manager, SmithRx is working to reduce pharmacy costs by reimagining the traditional PBM as a Drug Acquisition Platform built on transparent modern technology that aligns with the needs of our customers.