Managed Care - April 2008 - (Page 35) guarantees. Do so by having your consultant repeatedly negotiate with each PBM contestant, forcing all contestants to compete against the best terms offered by rival contestants. For example, assuming that your proposed contract includes language requiring the PBM to pass through to your MCO all rebates and all other financial benefits the PBM receives from every drug manufacturer and every other third party, and that most PBMs reject or alter your proposed contract language, then leverage your RFP power to require each PBM to do so. Tell all recalcitrant PBMs that certain PBMs have accepted your proposed language, which some PBMs will do, if you make sure to include smaller PBMs as contestants. Further inform recalcitrant PBMs that those PBMs that refuse to accept your required terms will be eliminated. If every MCO insists during its RFP that all drug manufacturer payments and discounts are to be passed through, PBMs’ almost-universal practice of retaining most third party financial benefits will change, dramatically decreasing drugs’ costs and increasing insurers’ savings. Similarly, if some PBM contestants accept your newly-conceived “generic drug guarantees” covering all generic drugs, and other PBM contestants refuse to do so, require the latter to do so or eliminate them from contention. While almost no existing PBM-client contracts include such guarantees, and PBMs have consistently written generic guarantees that are essentially useless, there is no excuse for any contract to be executed with guarantees that cannot be enforced and audited. After eliminating all PBMs that have refused to provide your required contract terms, select as your semifinalists those that have provided the lowest PMPM rates and the best financial and performance guarantees. Then use the interview process to extract further binding contract concessions from each contestant. Before a finalist is selected and announced, make sure all contract changes that you have extracted have been incorporated into a binding contract. Then require each contestant to execute its contract and a final binding certification stating that it will honor its executed contract without any further changes, should it be selected. On the day your RFP competition ends, pick your new PBM and sign its already-executed contract by placing your general counsel’s signature on your signature line. When you do so, you will know that your MCO is on its way to realizing far lower pharmacy costs — and far better performance. STEP 8 Reject marketplace platitudes that state ‘nothing can be done’ Many consulting companies claim that PBMs will not provide decent contract terms, and that nothing can be done to obtain such terms. If you accept their advice and fail to use your RFP’s leverage to extract airtight contract terms, your company will be destined to execute another flawed contract at the end of your RFP process. While almost no existing PBM-client contracts in the marketplace are airtight — almost all of them are stuffed with loopholes that drive up clients’ costs — small corporations and unions with as little as a few thousand covered lives have obtained entirely different contracts, resulting in dramatically lower costs. They have done so by drafting their own contracts with expert advice and by insisting that PBM contestants provide the requested contract terms in binding, executed contracts before any PBM finalist is selected. Therefore, there is no excuse for any insurer covering hundreds of thousands or millions of lives to be operating under a contract that is not airtight. Moreover, as soon as MCOs start insisting on airtight contract terms during the PBM competition that results from issuing an RFP — and MCOs thereby create a competitive marketplace requiring PBMs to win business by providing ever-lower PMPM administrative fees and ever-better financial and performance guarantees — the entire prescription marketplace will change. In short, MCOs have the power to not only dramatically decrease their own costs, but to transform the entire prescription coverage marketplace into a competitive marketplace that MCOs, not PBMs, control. MC Did you find this article provocative? Share your thoughts with other readers. Send an e-mail message to editors_mail@managedcaremag.com APRIL 2008 / MANAGED CARE 35
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.