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New Model Aims to Improve PBM-Employer Alignment


This comprehensive, pay-for-performance approach drives clinical quality and affordability.

Businesses coming together
Lindsay Bealor Greenleaf

Lindsay Bealor Greenleaf

A new pharmacy benefit contracting model for members of the National Drug Purchasing Coalition (NDPC), a group of 18 large employers-including PepsiCo, Inc. and ExxonMobil-is especially noteworthy as the industry rethinks the role played by PBMs and rebates in the supply chain.

The model is a comprehensive, pay-for-performance approach to driving clinical quality and affordability, according to Jennifer Luddy, Express Scripts spokesperson. “It aligns the PBM compensation to employer goals-improving the health of employees while keeping costs sustainable for employees and the employer.”

The new model from Express Scripts has two areas of focus:

  • Pay-for-performance for clinical and administrative plan management that improves patient and plan outcomes. “Express Scripts will demonstrate, definitively, that it does not just buy better, but manages trend and spend better,” says Luddy. “Express Scripts' ability to deliver clinical and financial outcomes is directly tied to its compensation. Pay-for-performance means Express Scripts will take on more risk from clients, and be rewarded only when it delivers on agreed-to commitments.
  • Clients pay what Express Scripts pays for prescription drugs plus administrative fees ensuring clients have the transparency they want. “By adding clarity to costs, our clients will have a more direct line of sight to the true cost of drugs net of all manufacturer discounts, rebates and incentives,” Luddy says.

Experts agree that this change could mean big things. “It's always a notable development when some of the country's largest employers change their relationships with PBMs,” says Lindsay Bealor Greenleaf, director at ADVI Health. “In lieu of rebates, Express Scripts will earn a fixed management fees plus additional at-risk compensation tied to outcomes. While delinking a PBM’s compensation from drugs' list prices is a positive development, the next issue to watch is how these fees are structured.”

According to Luddy, it is up to the clients in the NDPC how much of their fees they'd like to put at risk-“risk is driven by financial and clinical performance metrics,” she says. “The client receives 100% of all pharma value related to their utilization, meaning 100% of the rebate. Clients will use our standard formulary, our National Preferred Formulary. There will be no changes for these clients since they all already use our NPF.As far as utilization management goes, it depends on which package they take, but we are offering them our Advantage Plus or unlimited utilization management packages. It is 100% up to the individual plans how they want to set up their plan design/cost sharing with members.”

Related article: Formulary Management for Biosimilars: 4 Payer Challenges

Bealor points to the fact that Ohio Medicaid ended its contracts with CVS Caremark and Optum and both PBMs have been the focus of recent scrutiny for charging Ohio Medicaid fees that ranged from three to six times the industry standard.

“This new model aligns how and where our clients use their pharmacy dollars to achieve sustained clinical and financial goals,” Luddy says. “Together, we can focus on improving member health and increasing the efficiency of their total healthcare spend.”

What matters most

According to Luddy, the model will focus initially on five key therapeutic areas that matter most to payers:

  • Diabetes
  • Cardiovascular
  • Pulmonary
  • Autoimmune inflammatory treatments
  • Pain/opioids

“As the model evolves, more therapeutic areas will be added to create more value for clients and their plan members,” she says. “As the marketplace becomes more competitive, the ability to offer robust benefits becomes more important. Having greater transparency, lower costs, and better outcomes, payers with this model are well-positioned to gain greater clinical and financial value while delivering on what matters most: outstanding member care and better outcomes.”

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