PBM Negotiations. Take a Sad Song and Make it Better.

Hey Jude! There may be a lesson in that famous Beatles song applicable to negotiating PBM contracts.

You commonly hear there is no point in arguing over PBM contracts. You just accept them. One wag put it this way, “If I reject the contract, I go out of business immediately. If I accept the contract, I go out of business slowly.”

While you probably can’t simply walk away from gatekeepers to large blocks of business, you may be able to get small changes in wording that allow you to enforce your side of these contracts – no matter how bad they are.

Proactively Making the Most of Your PBM Contract

How can you approach PBMs in a positive way? They are typically viewed by pharmacies as multi-headed, fire-breathing monsters that are gobbling up the business. OK. But, the representative on the other end of the phone is a human being who may have some leeway to make changes in contract wording or provide other assurances you can document – and enforce.

Prices are probably off the table, but:

a) Can we state the prescription pricing formulas more clearly? This includes dispensing fees and transaction charges. Also, what other charges (like DIR fees) can be deducted and how are these computed?

b) Can we make it clear that I will be paid the amount that was adjudicated in accordance with the contract terms when I filled the prescription? This should not be changed for any reason, such as if the PBM later determines that the patient was ineligible. I am running a business and surely you understand that I need to know up front how much I am going to receive for the prescriptions I fill.

c) When it comes to pricing, what is the timing for updating reference prices (like AWP, NADAC, etc.) that determine my price? The contract may say the prices are updated at certain frequencies, but I would like to know how far behind the updates can be.

d) Can we state that the prices will apply at the transaction level rather than at an aggregate level? This is the only way I can determine if I am being reimbursed per contract terms.

e) If the contract provides for MAC, can we put an upper limit on the regression from AWP in computing MAC? Otherwise, I have no idea of my exposure to reimbursements that might be lower than my cost.

f) Will there be separate MACs for certain plan sponsors? This may be a back-door way of getting around the pricing formulas we have agreed to. Can I find out which sponsors are doing this? I want to take good care of patients for all sponsors and I might want to talk with sponsors that are putting me in an untenable position.

g) Can we state precisely when I should expect to receive payments so I can budget my cash flow? This also needs to be at the transaction level rather than in aggregate.

Gain Real-Time, Day-to-Day Insight on Contract Provisions with ScriptPro TPMS

As with any contract negotiation, you probably won’t get everything you ask for. But the starting point in many PBM contracts is to leave issues like the above open to interpretation and arbitrary abuse. If contract provisions can be nailed down, ScriptPro’s automated TPMS (Third Party Management System) will find the exceptions and provide detailed invoices you can submit to recover shortages.

TPMS processes each day’s transactions and queues up exception reports for action the following day. TPMS finds discrepancies down to the level of pennies and small percentage variances. When you correct for these discrepancies across the large volume of transactions running through a pharmacy, significant dollars can be found.

Don’t be too comfortable with averages. For example:

a) You may feel assured your collections are on track if your average Days Sales Outstanding is maintained at a level that looks reasonable compared to industry averages. But TPMS will highlight any payers that run significantly behind contract terms. If you apply pressure to bring these receivables in line, DSO may drop a small percentage. But the result can be a significant amount of cash added to your bank account or applied to reduce loan interest.

b) You accept that your average AWP regression on generic drugs is running just a little worse that you expected per the contract. This may seem okay, but TPMS will find any block of transactions with a regression that is significantly out of line and expose an opportunity for corrective action.

c) It’s fine to track average margins and hope for the best. But TPMS will show you any blocks of business where your margins are extremely low or even negative. This positions you for having a discussion with both payers and suppliers.

The third letter of TPMS stands for “Management.” TPMS is a system that organizes and summarizes details to help you Manage your business – and make it better.

‍