12 Steps Health Plans Can Take with their PBMs Now to Prosper During Industry Disruption

By Steve Baumgardner
Tue, Jan, 16, 2018

CVS Health’s plan to purchase giant insurer Aetna is causing health plan executives to question how this will impact their bottom lines and market competitiveness. Now is the optimal time for health plans to re-evaluate their PBM contracts to take advantage of emerging pricing opportunities and negotiate new terms if needed.

The proposed CVS-Aetna merger is the latest in a series of industry disruptors, and there may be more to follow soon. While these disruptors can be unsettling, they can also benefit health plans – if health plans know how to use the disruption to their advantage.

The Burchfield Group compiled a list of 12 steps that health plans should consider with their PBMs now to take advantage of emerging pricing opportunities and protect themselves from potential emerging threats:

  • Review your PBM contract terms. Become familiar with provisions that allow you to renegotiate pricing, or other terms of the agreement, even if your contract is not yet up for renewal. Understand your protections if your PBM is acquired, acquires or merges with another company.
  • Significant market changes often drive better pricing. Procurements or market checks during times of industry disruption often prompt PBMs to respond with price concessions in exchange for retaining your business or extending your contract.
  • Ask your PBM directly for price concessions. Many PBMs will be willing to sweeten the deal if you ask – especially if it’s supported with a well-written contract that allows you to leverage market events by taking advantage of market check opportunities.
  • Know what kind of pricing concessions are realistic. If you recently renegotiated pricing (in the last year, for example), the potential for gaining significant additional reductions from your PBM may be limited. But if it’s been three years since your last price talks, you may be able to save serious money by renegotiating now.
  • Know that anything in your contract is up for negotiation. That includes change of control language, pharmacy network pricing, rebates, and optional PBM services (including clinical programs such as prior authorizations and reporting capabilities).
  • Don’t forget about PBM performance guarantees. When consolidations and mergers happen, staffing changes and other “synergies” often follow. You may get better pricing, but the quality of service may decline. Make sure that any contract or revision still holds your PBM accountable for service components such as responsiveness, member wait times on the phone, accuracy of copayments charged, and other measures.
  • Protect your confidential data: Health plans are also concerned about remaining HIPAA-compliant should patient data potentially be compromised. Health plans can protect themselves on this front in several ways:

1) Make sure your contract specifies what the PBM will do to ensure that the appropriate firewalls are in place and the recourse or penalties permitted should these fail.

2) Make sure your contract gives you the right to conduct an independent third- party audit of the PBM’s claims processing system and data warehouse (and/or access to independent audit reports of the PBM) to identify potential weaknesses that could lead to issues.

3) Make sure your compliance and IT departments review, and are comfortable with, audit findings and contract provisions related to information firewalls and the security of your information.

4) Re-evaluate, and reassign if necessary, which entity is responsible for which delegated functions or services – e.g., call centers, Medication Therapy Management (MTM), prior authorization – to avoid potential conflicts of interest.

5) Know your contract termination rights. Understand your options if you are not satisfied.

Now that you know what to look for, you are in a stronger position to take advantage of any emerging pricing that works to your advantage, and what steps to take to protect yourself from possible emerging threats.

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