Now, more than ever, plan sponsors should look to evaluate their pharmacy benefit manager’s performance.

Plan sponsors go through the time and expense to try and maintain a competitive vendor contract. Here’s the drill: decide that you want to solicit new bids from vendors who want to compete for your pharmacy benefit management business; go through the procurement process of writing, scoring and evaluating an RFP and selecting a finalist; negotiate the terms and pricing of your new contract, and finally, execute the deal and implement the new program.

imageThe problems occur when there is no practical way to validate the performance of your PBM.  What good is negotiating the best contract if there is no accountability. For too many years, plan sponsors have depended on their PBM to let them know how they are doing! Strong audit rights negotiated in your PBM contract are necessary in order to safeguard your position.

PBMs have been reluctant to volunteer real transparency as it relates to their pricing, guarantees and rebates.  They cite confidentiality concerns and competitive trade secrets as their rationale. Plan sponsors have not only a right, but an obligation, on the part of their plan and its members to validate and verify their vendor’s performance.

Here are some of the major restrictions that can typically be found in a standard PBM contract and that should be addressed under your audit rights:

  • Giving the PBM the ability to “co-select” your auditors;
  • Limiting the type of information that the auditor can review;
  • Restricting the auditor from sharing their findings or pertinent information from the plan sponsor;
  • Prohibiting the auditor from copying any information or data that would be necessary for the plan sponsor to review;
  • Preventing the recovery of funds that are due the plan sponsor.

PBMs typically want to include language that requires a “mutually acceptable” auditor.  Many times they want the auditor to be a “Big 4 accounting firm.” This can lead to more expense than is necessary and the plan sponsor may have to settle with an auditor that is not as specialized as could be. We believe that eliminating some of the most experienced an effective auditors that specialize in PBM audits is unacceptable. If the auditor has demonstrated appropriate expertise, professional experience, adequate insurance, willingness to abide by a reasonable confidentiality agreement then that auditor selection should be at the discretion of the plan sponsor.

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