Managed Care - April 2008 - (Page 31) How to Dramatically Decrease Your MCO’s Rx Coverage Costs An experienced negotiator and lawyer describes in detail how health plans that contract with PBMs can get a better deal By Linda Cahn loopholes, and rewrite all terms that are increasing your costs. Here’s how. or more than two decades, every managed care organization in this country has strugSTEP 2 gled to control its ever-increasing preRewrite all contract definitions scription coverage costs. Years ago, MCOs expanded their insurance fraud The first terms to scrutinize are found at the beunits to try to control drug costs. Thereafter, MCOs ginning of your PBM contract — your contract defincreased their internal staffs to better monitor initions. prescription drug dispensing. Most recently, at the Nearly all PBM/insurer contracts contain defirepeated suggestion of pharmacy benefit nitions that are ambiguous or contrary to inmanagers (PBMs), health plans began urging surers’ interests. their clients to shift costs to members by For example, a “claim” is defined to allow means of increased copayments and other a PBM to invoice its client for “reversed” or programs. “rejected” claims, which typically constitute Unfortunately, none of the above strategies as much as 20 percent of all claims. has enabled insurers to control their preA drug’s “average wholesale price” is description coverage costs. In fact, drug costs fined to enable a PBM to retain all “bulk purhave continued to increase from 7 percent to chase” savings, rather than to pass them Linda Cahn 15 percent annually for the past decade. Thus, through to plans. As a result, PBMs can it is reasonable for every insurer to ask charge the per-pill cost of a drug based on whether it can take any steps that might effectively small bottles of 30, 90, or 100 pills, rather than the control its costs. lower bulk-purchase cost based on bottles of 1,000 Amazingly, the answer is a resounding “Yes.” or 5,000, from which pills are actually dispensed. Moreover, the cost-saving steps that any MCO can Also, AWP is defined to enable a PBM to cherrytake are easy — and quite inexpensive. pick the highest prices among several national reporting services’ different prices (such as First DataSTEP 1 Bank or Medispan), if the AWPs are different. Scrutinize your PBM contract “Brand name drugs” and “generic drugs” are defined to enable a PBM to relabel and mischaracMost insurers in this country subcontract their terize each, in the PBM’s own best interests. As a represcription coverage responsibilities to a PBM. Unfortunately, in so doing, they fail to realize that their executed PBM contract will be the major deLinda Cahn, a graduate of Princeton University terminant of their ongoing prescription costs. Inand Hofstra University Law School and a member surers accept PBMs’ standardized boilerplate conof the New York and New Jersey bars, is the presitracts that contain numerous loopholes and allow dent of Pharmacy Benefit Consultants, a nationPBMs to retain many hidden profit centers that wide consulting company that assists insurance continuously drive up their costs. companies, corporations, and unions in improving Accordingly, if your MCO wants to decrease its their PBM contracts and conducting better PBM prescription coverage costs, it must scrutinize every RFPs. Pharmacy Benefit Consultants can be term in its PBM contract, eliminate all contract reached at 973-975-0900. F APRIL 2008 / MANAGED CARE 31
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