PBM Direct Contracting

PBM Services – Direct Contracting

As a result of continued litigation regarding the AWP pricing benchmark, the planned introduction of AMP pricing by CMS in 2009, and a competitive price war for generics through the retail channel, we believe that the momentum has started where more plan sponsors will be considering direct contracting with pharmaceutical manuDirect Contractingfactures, wholesalers and pharmacy networks. This new strategy will alter or reduce the role played by PBMs. The process is referred to as “direct contracting” and will change the marketplace dynamics of providing pharmacy benefits.Another form of direct contracting is when a plan sponsor outsources the administrative systems and support functions required to operate as a PBM, to a third-party vendor. These vendors can operate “behind the scene” and enable the plan sponsor to “private label” the PBM services. The benefits to the plan sponsor includes marketplace branding, local control of utilization, formulary design control, acquisition-based drug costs and full share of rebates and manufacturers’ incentives. As a result of these comprehensive support services, plan sponsor’s of almost any size can potentially benefit from these new arrangements and may represent a significant improvement over traditional service contracts.

Financial benefits are only one element to consider, however, in a review of direct contracting. Additionally, a plan sponsor needs to evaluate the operational components as well as the strategic fit within their organization.

WBC is well-equipped to help you through this evaluation process. A claims re-pricing and contract analysis will provide the plan sponsor with a preliminary report on whether there is financial opportunity and can quantify the degree of improvement available. Once the scope has been defined, a feasibility analysis will examine all of the elements involved in creating the business case for recommending a change in your pharmacy benefit arrangements. This process includes:

  • Identifying Organizational goals
  • Resource GAP analysis
  • Feasibility of on-site pharmacy
  • Risk analysis
  • Financial modeling with acquisition cost pricing
  • Best Practice benchmarking
  • Resource allocation plan
  • Implementation workplan

Once the report has been created, recommended and accepted by the plan’s senior management, WBC is available to help you with the implementation and execution of an amended pharmacy benefit management plan, including contract negotiations.