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Each year billions of dollars in manufacturer rebates are at stake for both PBMs and the employers they serve. So how can you know whether your company is getting your fair share of manufacturer and PBM rebates, given the ever-changing drug pricing and rebate dynamics?
Now is an especially important time to ask this question. That’s because PBM rebate potential is growing very rapidly in today’s market — largely driven by the rebates generated from costly specialty drugs. So the opportunities to recoup more of your drug benefit dollars have never been better. Additionally, there are new emerging options for employers to lower their net drug spend and reduce their dependency on market rebates altogether.
While many drugs sell at deep and growing discounts, benefit designs force most patients to pay ever-higher out-of-pocket costs. What’s more, net prices (after rebates and discounts) have barely grown at all. Lower-priced versions of highly-rebated drugs are being blocked from PBM formularies because changing the “rebate game” is an existential threat to an important element of PBMs’ profitability. As such, PBMs have been decreasing their reliance on rebates and implementing more point of sale (POS) rebates. The challenges associated with rebate reform represents a complex, multifaceted change to an opaque system where the effects are highly unpredictable and subject to great debate.
The following tips are designed to help you optimize your PBM rebates so you are not leaving money on the table that you are entitled to.
1. How rebates are defined is as important as what percent your contract provides.
How your contract defines rebates and what manufacturer payments can be retained by the PBM can greatly influence the dollars you will receive. Having a trusted independent consultant guide your procurement and contract negotiation can help you capture the maximum value due to you.
2. Make sure your PBM is meeting its contractual rebate obligations.
PBMs self-report rebate data financials to employer clients. Because PBM rebate calculations are complicated, they can often be wrong as a result. And because most employers don’t understand how PBM rebates are calculated, mistakes generally go unnoticed. Hundreds of thousands, to millions of manufacturer and PBM rebate dollars, can be at stake for your company. That is why it is best to hire an outside PBM consultant with the appropriate PBM financial expertise to review the PBM- provided data to make sure you are getting credited the proper manufacturer and PBM rebates.
3. Expand your independent, third-party audit to encompass manufacturer rebate data, not just PBM rebate data.
To take this to an even deeper level, hire an independent, third-party auditor to closely examine the rebate agreements entered into between the PBM and the drug manufacturer. As with any audit, there are no guarantees, but in our experience, more than 50% of such audits will reveal that the PBM’s employer client is not receiving the rebate amounts they should be getting, based on the agreements signed between the drug manufacturer and the PBM. In the vast majority of cases, the money recouped will more than pay for the cost of the audit itself.
4. Make sure your rebate auditor has the right experience and expertise.
Be sure to choose an auditor who has a very detailed understanding of PBM rebates, manufacturer rebates, and PBM financials. This goes above and beyond doing the typical pharmacy claims or pharmacy rebate audit. Experience truly matters here. Ask how many audits the person has done, and what background the auditor comes from. For best results, you will want your auditor to have worked previously for a PBM within their rebate department. Also, ask what percentage of audits have resulted in “lost” rebate dollars being identified and collected. It should be at least 50% of the time to ensure you are not wasting time and money on a fishing expedition.
5. Optimize the timing of your PBM rebate audit.
To get the most accurate picture of your rebate dollars, make sure your audits cover a full calendar year period. Given reporting lag times, you will want to wait to do the audit to at least 180 days after the end of the last quarter you wish to have audited. So, to audit your rebates for calendar year 2018, you will want to start your audit in Q3 2019. Because every PBM is different, it is best to work with your auditor regarding timing for notifying your PBM of your intention to conduct an audit.
Even if you don’t believe there’s a need to pay for a full audit rebate of manufacturer contracts, retaining a specialized PBM consulting firm can verify that your rebate guarantees are met each quarter. These firms do this by comparing your claims data and product status against information in the same subscription database that PBMs use (MediSpan).