2010 is in full-swing and PBM trends for the year are beginning to take shape. One trend that will gain momentum this year is the use of restricted pharmacy networks.

Restricted NetworksAt one time, the larger networks were considered a competitive advantage, providing maximum convenience to enrolled populations.  The realtiy is that very few plans need the “convenience” of 57,000+ participating pharmacies.  In some metropolitan areas, there are literally pharmacy options on every corner. Most plans can meet the needs of their employee/members with a 15,000-18,000 store network, and in some cases, substantially less. The benefit of losing this excess baggage are better discounts and lower net pricing.

It has been interesting to listen to the dialogue that has evolved between finance and human resources within organizations that are considering more aggressive cost-reduction proposals for controlling their benefit costs. We have heard from several CFOs who were willing to disregard any anticipated employee disruption as a result of making this move.

Walmart and Walgreen’s are two chains that are being very aggressive in their promotion of creating a more “exclusive” retail alternative. Plan sponsors can achieve better net cost by steering employee/members to the stores of choice. The Caterpillar experience and the associated publicity will provide ground-breaking evidence (or not) that this strategy is one to be emulated by other sponsors.

Another alternative to consider for those sponsors who want to maximize their prescription drug cost savings while providing employees with more-than-ample choices for script fulfillment is to contract with a PBM that embraces full pass-through or acquisition cost pricing. This business model utilizes  an administrative fee as the primary or, in some cases, the only revenue source to the PBM. All discounts, rebates and purchasing incentives are passed-through to the plan sponsor without the creation of pricing spreads, thereby reducing the size of the invoice that gets presented to the plan sponsor for payment.

All-in-all, the aftermath of AWP pricing adjustments has created an environment where plan sponsors are questioning the discounting methodology typically deployed and are searching for better value. Restricted networks may be a useful alternative.

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