Written By: Cheryl Reifsnyder, PhD
Pharmacy benefit managers (PBMs) are companies that manage prescription drug benefits on behalf of health insurance plans, Medicare Part D drug plans, Medicaid, large employers, and other payers.1-3 They operate in the middle of the distribution chain for prescription drugs.1
For this article, we sat down with Nicholas DiPirro, PharmD and Senior Solutions Manager at Pulse8, to gain insight into the payer’s relationship with the PBM and ways to leverage that relationship to identify and manage areas where expenses can be reduced.
Q: Nicholas, why don’t you start by telling us a little about PBMs?
PBMs tend to hold a disproportionate amount of power in the marketplace compared to most small- or medium-sized health plans. They take on a lot of responsibility when it comes to the pharmacy benefit management for those health plans. That’s great for the health plan in a lot of ways but also creates some inequity, both in power and in information sharing.
Q: What blind spots might a health plan have in their PBM reporting and how could those blind spots impact their business?
PBMs generally determine what information will be shared with health plans when reviewing pharmacy program performance. This relationship dynamic creates vulnerability for health plans, who may be blind to opportunities for improvement in their pharmacy program management.
Questions such as the following can help the health plan reveal blind spots representing significant opportunities:
- How do my drug unit costs for each line of business (LOB) compare with those of other health plans?
- How well does my PBM’s performance comply with our contract terms and network rates?
- How are my clinical and utilization programs administered? How is the success of each program evaluated?
Health plans that are better able to access, analyze, and act upon their pharmacy program data will be more equipped to improve their program’s performance. Data is the precursor to information; information is the foundation of intelligent decision making and action.
Q: What is the number one thing a health plan can do to evaluate the performance of their PBM?
Gain access to their data, compare it to the industry benchmarks, and leverage the information for contract term enforcement or improvement. That’s probably the biggest opportunity financially for the PBMs: that either their contracts are not the best that they could be, or they’re not being lived up to.
Q: How can a health plan identify and manage areas where costs and utilization are higher than the industry average for the population being served?
The first step is to access and organize their own data. Then, after they’ve organized their data into whatever sets make sense, (whether it’s by patient population, disease state, etc.), they need to compare their data to external benchmarks for the patient populations covered by the plan’s LOB. The health plan may also benefit from comparing their pharmacy program data with their formulary and with their contract terms, to identify gaps in performance.
Once gaps have been identified that information can be leveraged in contractual discussions with PBMs.
Q: What external benchmarks and data sources might a health plan need to leverage to understand the performance of their PBM’s contract relative to competitors?
Any team looking to understand the performance of a health plan’s pharmacy program relative to competitors will need to access external data sources and benchmarks to create the necessary context for comparison. They should consider three critical external resources:
- Subscription to a drug information database that organizes, classifies, and aggregates drugs by Generic Product Identifier (GPI), National Drug Code (NDC), drug classifications, and therapeutic categories
- Subscription to a database of NDC level pricing comparisons aggregated by payer type (such as Medicare vs. Medicaid) and further grouped by national benchmarking percentile
- Subscription to a database of provider and pharmacy demographic data including National Provider Identifier (NPI), address, provider type, pharmacy type, etc.
Simply accessing these data sources could cost somewhere between approximately $170,000 and $200,000 a year. That’s just the cost of accessing the information, before doing the actual work of building tables, making comparisons, etc.
Q: How is data presented to health plans using Calcul8 Rx? How do health plans access that data?
Calcul8 Rx is a pharmacy program management solution that provides reporting, benchmarking, and analytics to assist payers of the pharmacy benefit. Calcul8 Rx is a cloud solution, so it’s easily accessed with a secure sign-on, the same way you access a web page. The data is presented in filterable and sortable dashboards, including graphs and tables that can help users quickly identify the areas of greatest opportunity, or drill down to areas of particular interest. Data can additionally be exported to CSV or Excel spreadsheets to enable the user to further utilize, analyze, store, or share the data as they see fit. It empowers them in a marketplace where data, when used intelligently, can identify, and manage areas where expenses can be reduced.
Q: What lines of business (LOB) can be included and used in Calcul8 Rx?
Calcul8 Rx is LOB agnostic. Any type of health plan serving any patient population’s pharmacy needs may benefit from using Calcul8 Rx as an independent and impartial source of truth that enables intelligent action, improves contract negotiating leverage, and reduces PBM switching costs.
Q: How often is the data updated? How do health plans share their data with Pulse8?
Data is typically updated monthly but can be updated more or less frequently to meet a health plan’s needs. The data required for Pulse8 to implement Calcul8 Rx is relatively simple for health plans to acquire. It should include member, enrollment, provider, and prescription claims data. After implementation, health plans typically share updated data with Pulse8 on a monthly cadence.
Q: How can identified opportunities for clinical intervention be delivered to providers for review and action?
Pulse8’s provider-facing portal, Collabor8, bundles risk, quality, and pharmacy gaps in care by patient according to the health plan’s requirements. These opportunities are delivered to providers for review and resolution in a portal that can be easily accessed via single sign-on, either from within the health plan’s portal or integrated within the provider’s electronic health record (EHR). This makes them easy to review and act upon for the provider. It also allows us to have two-way feedback with the provider, so that when we identify a gap in care but maybe the provider determines that there is clinical justification for what is being labeled a gap in care, it gives us that negative feedback loop so we don’t continue to send notifications.
Calcul8 Rx: a PBM management solution
Data can be incredibly valuable. In and of itself, though, data doesn’t necessarily mean a lot. First you need access to it; then you need the ability to organize it into useful information. When data becomes information, that’s the point when you can start to have the conversations that make you successful, conversations that can transform information into intelligent, focused action.
Calcul8 Rx was developed using first-hand experience with the world of PBMs. It helps payers manage their providers more effectively, including the PBM, network pharmacies, pharmaceutical manufacturers, prescribers, and insurance plan members. By doing so, it makes it possible for payers to adjust their approaches to improve the effectiveness and affordability of the pharmacy benefit.
To learn more on this subject, check out Nicholas DiPirro’s webinar: The Source of Truth: A More Intelligent Way to Manage Your Pharmacy Benefit.
- Pharmacy Benefit Managers and Their Role in Drug Spending. The Commonwealth Fund. Updated April 22, 2019. Accessed November 2, 2021, https://www.commonwealthfund.org/publications/explainer/2019/apr/pharmacy-benefit-managers-and-their-role-drug-spending.
- Arnold J. John Arnold: Are pharmacy benefit managers the good guys or bad guys or drug pricing? STAT. Updated August 27, 2018. Accessed November 2, 2021, https://www.statnews.com/2018/08/27/pharmacy-benefit-managers-good-or-bad/.
- PBM Basics. Pharmacists Society of the State of New York, Inc. Accessed November 2, 2021, https://www.pssny.org/page/PBMBasics.