Minding the Guarantee Gap - A 7-Part Series

By Justine Wiebusch, PharmD, MBA
Mon, Nov, 09, 2020

For more than two decades, The Burchfield Group, an Aon Company (Burchfield) has worked with health plans to negotiate contracts with their Pharmacy Benefit Manager (PBM). Whether it’s a Request for Proposal (RFP), market check, renewal, or performance auditing, Burchfield has a front row seat to PBM contracting practices. In this article, we will discuss some of these practices and how some practices merit reconsideration given the drug pipeline and recent industry trends.

Burchfield prides itself on protecting its clients for the future. We call this “future-proofing.” In the past, exclusions of certain products from PBM contract pricing guarantees made sense because they were considered to be immaterial with very low utilization. Now, expected utilization increases in some of these historical exclusions move them into the realm of materiality, thus meriting review from a different perspective.
Plan sponsors will want to incorporate this growing drug spend in model forecasting, pricing guarantees, and contract risk assessments. In many cases, the exclusion of specific products can cause pricing guarantees to appear more competitive, without delivering any additional savings. In this blog series, we will examine common exclusions and recommend how plan sponsors can future-proof their contract by adding clarity to the following drug categories:

  • Biosimilar Drugs
  • Limited Distribution Drugs
  • Usual and Customary Price Claims
  • 340B Pharmacies
  • Over-the-Counter (OTC) Claims
  • Vaccines

In our Health Plan Consulting Practice, Burchfield encourages our clients and PBMs to limit exclusions. However, it is not always possible to get exclusion-free bids from PBMs. In the event that a bidder chooses to continue contracting with a pricing guarantee exclusion, the following key factors are accounted for in financial modeling and contract risk discussions with our clients:

  • How the terms are defined
  • Key trends in the drug category
  • Possible motivations for a PBM to exclude these products
  • Current and forecasted value of inclusion in Pricing/Discounts
  • Current and forecasted value of inclusion in (or exclusion from) Rebates

To keep the information up-to-date and consumable, we will publish a discussion of one category of common pricing guarantee exclusions regularly. Throughout this series, Burchfield will share our passion for contracting in this complex industry by offering insights into PBM contracting, describing how plan sponsors can “future-proof” PBM contracts.