As major purchasers of prescription drugs for their public employee drug plans and other entities, states can leverage their buying power by establishing favorable terms in their contracts with pharmacy benefit managers (PBMs).
The National Academy for State Health Policy’s (NASHP) new resource, Model PBM Contract Terms, offers specific language that states can use in their requests for proposals and contracts in order to achieve cost-saving for states, including:
Administrative-fee only compensation;
Guarantee 100 percent pass-through of rebates and revenue to states;
Cost trend and pricing guarantees;
Price transparency; and
Member cost-sharing protections.
The model PBM contract was developed by NASHP legal consultant Erin Fuse Brown, MPH, JD, in consultation with members of NASHP’s Pharmacy Cost Work Group and others who have experience implementing – and achieving saving from – their state-of-the-art contracts with PBMs.
Establishing favorable PBM contract terms can be a state’s first step toward leveraging additional savings through a second strategy – implementing a state purchasing pool for prescription drugs.
Once a state has established a favorable contract with a PBM for its public employee drug benefit plan, it can allow others – such as individuals and small employers – to join in a purchasing pool. This can be a win-win situation, where the increased negotiating power of the state’s expanded purchasing pool results in lower prices for all pool participants.
Keeping the State Rx Purchasing Pool administratively separate from the state employee drug plan, – though purchasing pool members and the state plan would use the same PBM – effectively avoids multiple legal and regulatory difficulties. Uninsured individuals could be given drug discount cards that allow them to enjoy the discounted drug prices available to purchasing pool members. Concerns about adverse selection, which would be relevant to medical benefits, are not a factor for this model because prescription drug plans do not pool risk to secure savings. Instead, the more covered lives a purchasing pool has, the greater the savings due to the increased purchasing power of the plan.
Speakers from Wisconsin and Connecticut will share their experiences with PBM contracting and leveraging state employee drug plan purchasing power during a NASHP webinar, Model PBM Contract Language and State-Buy-In Model, for states officials only, at noon (ET), Thursday, Feb. 6, 2020. The webinar is for state officials only. Register for the webinar here.