PBM RFP Best Practices to Maximize Your Pricing and Negotiating Leverage

By Steve Baumgardner
Mon, Oct, 21, 2019

A priority for many health plans is to negotiate a PBM contract that offers the most competitive pricing with the highest levels of service and flexibility for their plan and members. In order to achieve this, health plans must maximize their leverage by executing a well-strategized RFP. Nothing maximizes a health plan’s leverage more than an RFP in which the bidders perceive an uncertain, but potentially successful, outcome. This article outlines how a health plan can best prepare for an optimal, efficient and successful RFP.

The following are best practices and tips for pharmacy department leaders and other health plan professionals charged with owning the PBM RFP process:

  • Plan for a series of initiatives: Leverage the RFP process to ensure success of your PBM strategy throughout the term of the agreement, such as having the ability to execute an annual or mid-contract market check, customize a pharmacy network or formulary, or bring certain services in-house. Make sure your new PBM contract also allows you to retain the leverage you need to be successful in cases of unexpected events. Ideally, your contract should contain a term for convenience clause that allows you the most leverage with your PBM in the future.
  • Give yourself enough lead-time: PBMs typically grant more favorable pricing and service commitments on RFPs that are well-planned and executed, not those thrown together at the last minute using a standard template. Ideally, health plans should start the RFP process 18-24 months before the new contract start date to allow time for a robust and thorough RFP process, negotiation to a signature-ready contract, and potential implementation of a new PBM – in that order.
  • Take stock of what has changed at your health plan, in your market or with your current PBM. Perhaps your health plan has entered new markets or will soon be expanding into new states or with a new line of business. What other unique pressures and challenges are you facing? How well can your current PBM meet these and any other emerging needs? Know what you need to ensure your continued success and incorporate this into the RFP.

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  • Obtain input from multiple stakeholders across your organization. This includes the C-suite, legal, compliance, IT, marketing and sales, operations, clinical, finance and actuarial. From each department, determine what is working well with the pharmacy benefit/PBM and what areas may be of concern. What additional support could they use from their PBM? This may include innovations such as PBM clinical support for maintaining or improving Medicare Star Ratings, assisting physicians with real-time prescribing, or allowing your members to check drug prices via hand-held electronic devices. Interviewing stakeholders and asking the right questions will result in a customized questionnaire and set of minimum requirements unique to your plan that highlight specific areas for the PBM to address.
  • Keep the RFP process on track and on schedule. This may include having weekly or biweekly check-ins with key individuals involved in the process so that necessary deliverables are received on time. Have an internal communication plan in place so reminders and updates are sent to the appropriate people at the appropriate times. Remind everyone involved of the need for confidentiality and controlling what is discussed with the incumbent PBM and other bidders outside of the procurement process.
  • Create the RFP financial model early in the process using the actual claims data to be sent to PBMs. This ensures that the data is accurate and complete. You do not want to discover data issues later in the process, especially if you have already determined finalists. Data issues will impact the integrity of the process. Find them early!
  • Narrow your choices down to two finalists. Drive competition and negotiating leverage throughout the entire process. At the finalist stage, maximize this leverage by having the final two PBMs compete for your business with additional or improved commitments until the final award of the business via contract execution.
  • Use technology to ease internal review of the RFP responses. Using online procurement services allows for a secure central repository of all information. It allows reviewers an efficient, side-by-side review of each question and the PBMs’ response. Sections can easily be broken out by department for more in-depth review by internal SMEs and cross-referencing between PBMs.
  • Consider using an outside consulting firm with the right PBM expertise to help ensure success of the RFP process. An RFP can be a labor-intensive process at a health plan. You may only conduct a full market RFP once every three to five years. Using a consultant that conducts many health plan RFPs every year will compliment your team’s expertise, maintain current market knowledge and keep you on a path to success!

Going through a PBM RFP process is more than just a check-the-box task or an exercise in reworking past boilerplate contract language. A well-planned and thoroughly executed RFP that includes multiple internal stakeholders, dedicates adequate resources, allows sufficient time and reflects your health plan’s unique value prop will maximize your leverage and drive your plan to the best pricing and services that meet or exceed your plan’s needs throughout the PBM relationship.

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