By Tim Thomas / On Aug.30.2016 / In PBM, Pharmacy Benefits Management, Pharmacy Benefits, / Width

When reviewing a PBM contract and benefits plan, there are a few areas I always analyze to ensure maximum savings are being achieved for my clients. Areas of concern are formularies, benefits design and specialty/mail pharmacy.


If you’re just joining this blog series Weathering the Rx Storm, then catch up by reading blogs one and two. In the last blog, I spoke about negotiating pharmacy benefits management (PBM) contracts and spotting the red flags that may be draining your finances. This is only one of the many ways to save money on your company’s pharmacy benefits plan.


This month, I’ll review how selecting the correct formulary, managing benefits design and analyzing specialty/mail pharmacy can lead to increased savings for your company.


  1. Choose the correct formulary. When managing a formulary, you must first determine what type of formulary to choose. PBMs offer a wide range of formulary options from open formularies to exclusionary formularies with many options available in between these two extremes. In an open formulary, all drugs are covered, in an exclusionary formulary many drugs are excluded from the formulary and are not available to the participant under the plan. More often than that a payer chooses a formulary that falls somewhere in the middle that allows for generics, preferred brands and non-preferred brands with some or no exclusions.


It’s important to match your workforce’s existing utilization to the different formulary options available and determine - based on disruption and cost - which is best for your company. The tighter and more restrictive the formulary, the more rebates are likely available. If you’ve negotiated right and can validate that rebates are coming to you, then it may be a good fit. But remember, in most cases, the cost of the drug is more important than the rebate opportunities you can potentially achieve.


Before making a decision on your formulary, also consider the current overall environment of your company. Is it time to cut costs company-wide? Is it a bad time for another change in your workforce benefits plan because the membership is already dealing with other company-related stressors?


  1. Effectively manage your benefit design. Proper management of your company’s benefit design can assist your bottom-line savings, but first you must ensure your current PBM contract is drawn up to meet your goals (vs. that of the PBM).


There are many things that can be done to reduce costs in your Rx benefits program, yet still provide effective medication solutions for your members.


  • Prior Authorizations (PAs): PAs require that a doctor or prescriber show that a patient medically meets the requirements for a particular drug. This is a common technique to manage drug spend, but you’ll need to get it set up appropriately with your PBM to ensure the more expensive drugs are blocked until a PA is received.


  • Step Therapies: For step therapies, new members must complete step 1 - utilizing a less expensive (often generic) medication -  prior to moving on to step 2 - obtaining a more expensive solution. This provides greater savings for the overall plan.  


  • Quantity Limits: This limits the amount of medication prescribed over a certain period of time (i.e. a person is limited to a certain number of pills per prescription or month). These limits are used to prevent overuse of certain medications such as sleep aids and also to provide greater savings for your company.


  1. Are there savings by utilizing mail? Oftentimes, people think mail is less expensive than retail since the discounts and rebates in mail are usually greater. In my experience of reviewing client data, I’ve validated that mail can often be more expensive for the payer than retail.


A few ways to solve this issue include:

  • Make copayments on mail and retail the same.

  • Have members go to a 90-day retail program.

  • Make sure the PBM utilizes the same claims processing rules for mail


  1. Consider more exclusive pharmacy networks. Do you really need 60,000 pharmacies? Eliminating certain pharmacies from your network might lower costs, but make sure you have enough coverage to reduce employee disruption. The best scenario here is when most of your employees are in a relatively close area.  This means provider pharmacies in that area will want to compete for the business. Make sure your PBM is passing most of the value of excluding pharmacies on to you.


  1. Create a specialty pharmacy strategy. Most PBMs have their own specialty pharmacy or a preferred vendor that they will recommend to you. If you have negotiated your PBM contract correctly, it’s not mandatory for you to use them. It’s important to analyze your employee Rx usage data to determine which vendor makes the most sense for your company. Often carving out Specialty Pharmacy and/or Specialty Pharmacy Management makes sense.


The right pharmacy benefits consultant can assist you with analyzing your employee data so you get the most out of your pharmacy benefit.


In the next blog, I’ll discuss how to get your members utilizing the new plans you might be implementing. In the meantime, please feel free to reach out directly if you have any questions or need Rx benefits advice.


Tim Thomas is a Florida Health Care Coalition Affiliate Partner, a pharmacist, and the owner and executive director of Crystal Clear Rx, a group specializing in pharmacy benefits consulting. For more info, visit or call 303-955-7827.