By Daron Pitts – President and Stop Loss Placement Specialist at XL Benefits Insurance Services, Inc. – Visit my website
Just rolling with whatever PBM the TPA prefers or recommends versus really doing due diligence could be the difference of thirty percent in Rx costs.
That’s not a rounding error. On a plan where pharmacy is twenty-five or thirty percent of total spend, that’s a transformative number.
Here’s a real example. We had a group on an Optum PBM contract that was already fairly well negotiated. Good rebates, about $40 per member per month coming back. Net cost was around $80 per member per month.
We moved them to a PBM that was managing the formulary more carefully. Not rebate-hunting, focused on the most cost-effective drugs. The per-member-per-month cost dropped by more than fifty percent. We got their drug cost down to less than $65 per member per month, and they still got some rebates back, maybe $10 instead of $40. Net basis: $55 per member per month versus $80.
And that was coming off a program that was already giving them good rebates.
The PBM builds the formulary, which drugs are covered, which tier they fall into, what the copay structure looks like. They negotiate pricing with pharmacies, manage the rebate schedule, handle specialty drugs. There are a lot of levers to pull.
Most brokers have one or two favorite PBMs and stop there. But there are so many programs out there; international sourcing, manufacturer assistance programs, formulary optimization. The easiest, lowest-hanging fruit for any self-funded group is getting the PBM right.
If you’re self-funded and you haven’t done a serious PBM review in the last two years, you’re probably leaving real money on the table.
