PBMs help follow doctors' orders - pharmacy benefit management

HR Magazine, Sept, 1997 by Jay Greene

Vera Clark knows exactly what kind of pharmacy benefit management (PBM) vendor Office Depot needs: one that provides prompt and accurate service, monitors quality, provides regular performance reports, and helps the company stay within its health care budget.

Unlike most companies that hire consultants to act as insurance brokers, Office Depot conducted its own search for a PBM and expects to select one this fall.

"We could have used a broker to help us," says Clark, manager of benefit services for the Delray Beach, Fla.-based office supply chain. "But it's a lot more fun when you get involved. You have much more control and develop a better relationship with the PBM you ultimately select."

Office Depot is especially interested in a PBM willing to develop performance standards and agree to financial incentives and penalties for meeting or missing them. "We want them to hold up their end of the bargain," Clark says.

Clark's approach reflects the realities of pharmacy benefit providers, which vary little in costs but compete heavily on service and quality. On average, in 1995 pharmacy benefit programs cost $424 annually per covered employee for companies with more than 500 employees, according to A. Foster Higgins. That figure reflects a 4.7 percent increase from 1994.

Over the past five years, the PBM industry has experienced unprecedented growth while struggling to meet rising customer expectations, says Michael Deskin, president of the Pharmacy Benefit Management Institute (PBMI), a Phoenix-based trade group of PBMs, employers and HMOs. According to Deskin, PBMs have spent millions of dollars to upgrade their management information systems and have improved drug utilization analysis. However, mergers and acquisitions of PBMs have adversely affected customer service, he says.

PBMI offers a software program to help companies develop requests for proposals (RFPs) that best suit their needs, Deskin says. With the software, vendors can respond in data entry forms that are easily compared, he says. But because of major differences in service and quality among PBMs, companies shopping for them should set their own criteria for selection and for monitoring performance, Deskin says.

"There really isn't much difference in prices among PBMs," Deskin says. "You identify, the best vendor based on your needs. Do you need a national one or will a regional one do?"

Companies should require PBMs to guarantee that promises made in a formal proposal be included in any final contract, Deskin says. "It will take away any marketing ploys PBMs routinely stick in their [RFP] responses," he adds.

One provision to examine is the skill level of the PBM's claims-processing representatives. "The service you receive from a vendor depends on the skills of the person you are working with as opposed to skills of the company," Deskin says. "Some PBMs do a bait-and-switch routine. First they assign an experienced person. Then they go to a less experienced person for claims processing. Don't let them get away with this. It can make a big difference."

One way to get around these tactics is to insist that an experienced claims processor be included as part of the contract for as long as that person is employed with the PBM, Deskin says.

UTILIZATION DATA

One problem that PBMs are trying to rectify is the traditional shortage of comprehensive utilization and quality control data that would enable companies' human resource managers and HMOs to monitor effectiveness, Deskin says.

"We just started to get good data to help our clients," says Margaret Kolb-Tavis, a consultant with Marsh and McLennan, a Minneapolis-based employee benefit consulting firm. "Some PBMs are better than others. You have to be careful in selecting a PBM and specify up front the data you want and how you want it formatted."

Good PBMs can review potential drug interactions by analyzing patient medical records, says Carol Sardinha, director of communications for the Academy of Managed Care Pharmacy, an Alexandria, Va., association of 4,000 pharmacists who work for HMOs and PBMs.

"Often physicians don't know if a patient is taking other drugs," Sardinha says. "PBMs can collect this information and discover [potential prescription conflicts] to keep the patient from going to the hospital, which can increase medical costs."

Tracking drug utilization also helps companies develop patient health education and prevention programs such as stress management and weight loss, Sardinha says.

One key question that Patricia Wilson, president of Wilson & Associates of Rosemont, Pa., likes to ask PBMs is how they collect patient medication information.

"Some just ask open-ended questions in application forms," Wilson says. "I prefer PBMs that have a checklist with all common medications. It is much easier for patients to remember the drugs they use that way."

Another important point is how well the PBM interacts with physicians and patients when the issue of generic drug substitution comes up in mail-order prescriptions. "It is always wise to ask the PBM if they routinely call the physician for permission to substitute for a generic and to also call the patient to inform them about the change," Wilson says. "If the patient expects the pink pill and gets the blue pill there might be a problem at the mailbox. It is a simple thing, but it says a lot about whether the PBM is feeling responsible to the patient or just pushing pills."