Managed Care - May 2008 - (Page 45) MCOs, but small to mid-size MCOs might not have the cash flow to pay PEPM as an administrative cost. They may view that approach as a negative in terms of their cash flow and seek to defer payment through sharing of rebates paid well after the services are rendered. Yet other MCOs may be focused on retaining membership in a tight labor market. These organizations want the ability to create a cost-effective plan that offers a range of attractive options (e.g., ease of access, broad formulary, low cost share) to plan members. Ultimately, what MCOs want are PBM programs that offer customized approaches, are highly flexible, and give them the choices they believe will produce the best results for their organization and members. For example, one large Medicaid MCO in the Northeast wanted to add a number of over-thecounter (OTC) drugs to its list of drugs offered at maximum allowable cost (MAC). Medicaid covered those drugs, and the plan believed such an approach was ultimately best for its members and the organization. The PBM worked closely with the plan to develop a much broader MAC list, including the desired OTCs. To provide additional incentives for the PBM to lower costs and reach preset goals, the pharmacy director for the MCO put in place structured guarantees that gave the PBM incentives for reaching certain goals. The program was highly successful for the MCO, as it created a benefit that complied with regulatory requirements, pleased members, and saved the MCO money. pricing strategies, and other programs affecting the cost, quality, and use of the prescription drug benefit that are of interest to the MCO at the time of contracting. For example, acquisition costs, pass-through pricing, guaranteed low-cost administrative fees, greater percentage of rebates, or even no rebates should all be points a PBM is willing to discuss and to disclose in a contract if the MCO so desires. Mutual trust This program worked because the MCO and the PBM had a relationship built on mutual trust and respect. The program was also successful because the MCO had an engaged director of pharmacy who knew what he wanted for his membership and relied on the PBM to supply the needed counsel and services. It is in pricing and business practices that transparency becomes critical. There are many definitions of the term today, to the extent that many within the industry are not sure of an exact explanation. However, at its heart, transparency is an arrangement in which the PBM provides the MCO with requested information on revenue streams, Look for Integrity Over the past few years, there have been several high-profile cases of PBMs engaging in tactics that some find questionable. Therefore, integrity is quickly emerging as one of the factors MCOs demand when selecting a PBM. Potential customers should consult with the PBM’s current and past customers, as well as with consultants, to determine the PBM’s reputation for fairness and integrity. The American Accreditation HealthCare Commission/URAC has developed a number of standards that can help MCOs identify PBMs that meet stringent guidelines for both services and business practices. URAC evaluates PBMs for organizational quality, customer service, communications, disclosure of pricing policies, pharmaceutical distribution, drug utilization management, and formulary/pharmacy and therapeutics committee. Accreditation by URAC gives MCOs an added level of assurance that their PBM is committed to quality and fair disclosure of information. In the effort to manage pharmacy costs, MCOs should explore all available options. However, they must also remember to emphasize the critical factors that drive cost and outcomes. Ensuring transparency and the fair disbursement of rebates is an important step; it is not, however, the only step toward managing prescription drug expenses and their impact on overall medical costs. When the MCO focuses on improving quality and outcomes and on meeting the needs of plan members, ultimately a better and more costeffective pharmacy benefit is created for members and the organization. MCOs and PBMs can then work together to develop fair and appropriate pricing strategies that offer transparency to the MCO and encourage a high level of performance by the PBM. The MCO will provide a more valuable benefit while ensuring the lowest net cost to the plan. MC MAY 2008 / MANAGED CARE 45
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