Another year has nearly passed with little change in how the pharmacy industry operates. Pharmaceutical companies are still raising drug prices, PBMs are still receiving clawbacks, and brokers and employers are still searching for the magic formula to save money.
Fortunately, we do know that the variables of that seemingly elusive formula are found in pharmacy claims. Those binders, spreadsheets, and charts you receive every year at renewal contain the details needed to affect positive change for your pharmacy plan – you just have to know where to look.
Don’t waste another year doing what you’ve always done and hoping for the best. Start developing a solid pharmacy strategy now to finally control pharmacy spend in 2020.
The foundation of a solid strategy
An effective, cost-savings pharmacy strategy is built on deeper visibility into your pharmacy claims. In order to control spend, you must identify exactly where your money is going. However, with over 50 fields and hundreds, if not millions, of rows in a standard claims file, it can seem all but impossible to productively aggregate your data.
Start by asking questions. Many common pain points are not explicitly included in standard reports, so creating an effective strategy starts by initiating discussions about pharmacy claims with key stakeholders.
Our pharmacy team has developed four strategies that will help you dig into your pharmacy data. Today we’re sharing two of those strategies to help you start conversations and begin building a solid 2020 pharmacy strategy.
Strategy 1: Monitor NDC exclusions
A National Drug Code (NDC) is an eleven-digit number assigned to every prescription drug that identifies the manufacturer, product, and package size. A particular drug may be assigned more than one unique NDC, with a different sales price attached to each.
With so many NDC options, PBMs, health plans, and insurers can decide which NDCs they cover. However, this control may not always benefit the plan sponsor or employer. When a particularly expensive NDC slips through and is covered at the pharmacy counter the plan and participant pay more.
By monitoring NDC pricing, you can choose to exclude certain high dollar NDCs from your plan and recognize if a costly NDC is covered when a cheaper alternative for the same drug is available.
A solid pharmacy strategy requires maintaining an updated NDC exclusion list, to ensure your plan is not overpaying.
What to look for:
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Drugs with a price significantly above the median price
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Drugs with a lower number of claims but high total spend
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Pharmacies with above average total spend
Strategy 2: Expect PBM accountability
PBM contracts are full of guaranteed rebates, dispensing fees, and discounts, with little language to ensure those guarantees are met. Moreover, contractual discounts are only guaranteed as an average for each drug category, so individual drug discounts can vary as long as the average is met. Often, certain drugs are more heavily discounted to “balance out” the average, which means your plan could be overpaying even though the overall average discount doesn’t show it. Although industry influencers are calling for increased transparency, it is the plan sponsor’s responsibility to hold their PBM accountable.
Begin by searching your claims files for actual rebates received, dispensing fees paid, and discounts given. This allows you to compare actual rates versus contracted rates. Identifying anomalies, errors, or unfulfilled guarantees and working with your PBM to fix issues is the basis of a strong pharmacy strategy.
What to look for:
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Total rebates, dispensing fees, and discounts received
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Rebates, dispensing fees, and discounts for each drug category
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Anomalies in discounts received for certain drugs, either well above or well below the contracted rate
Start now
Developing a pharmacy strategy that results in highlighting claims issues, identifying outliers, and finding solutions starts with your data. Insist on gaining visibility into your claims to see where your pharmacy dollars are going; after all, it is your money. Start conversations with your PBM or broker today about NDC codes and PBM accountability to drive positive change for your plan and optimize your pharmacy benefits.
Check in next month for two more strategies to help you make 2020 the year you finally take control of your pharmacy spend and put your plan back on a path of financial sustainability.
— Feeling overwhelmed? PCM’s new Analytics platform breaks down your claims data, line-by-line, to show you how to save.
Updated: March 4, 2021