The popularity of the ‘bundle and save’ concept may seem like the best way to get everything you want – and then some – in one package at one price. Who hasn’t had the cable-internet-home phone package or opted for the heated seats-satellite radio-moon roof combo in a car? While these bundled options may offer some advantages, there are some situations, especially in the management of healthcare benefits, when carving out the pieces can reveal some compelling reasons to avoid the bundle.
On the surface, having medical and pharmacy benefits rolled into an insurance plan seems logical. In the ‘carve-in’ model, the health plan or medical insurance carrier often subcontracts the pharmacy benefit management function, charging an administrative fee to handle all of the terms and conditions of the contract. While the convenience of this option may be advantageous for small groups (<200 lives), it is not often the case for midsized and larger employers, since health plans don’t typically have as much experience managing self-funded groups. Additionally, while the perception is that carve-in may ease the administrative burden for the plan sponsor initially, it is important to consider the trade-offs as well, such as loss of clarity regarding contract and pricing terms and insight into the true cost of drugs.
The alternative is to ‘carve-out’ the pharmacy benefits and contract directly with a Pharmacy Benefit Manager (PBM). Since pharmacy drives a major portion of total healthcare spend, the PBM offers unique insight and expertise to help the plan sponsor focus on controlling this spend. This is increasingly important, as expensive specialty medications are expected to continue to increase in utilization and impact spend. The PBM’s clinical oversight and pharmaceutical knowledge is instrumental in controlling the cost and utilization of these specialized and often costly medications.
A carve-out strategy has many advantages for plan sponsors, including the following:
- TRANSPARENCY. In the carve-in model, only the health plan administrator is privy to the financial relationship with the PBM, including drug price, rebates, volume pricing allowances and other incentives. Carving out the pharmacy benefit may allow the plan sponsor visibility into the true cost of the prescription drugs, since PBMs have the capability of entering into transparent arrangements. However, ‘transparency’ can mean different things depending on the PBM. For EnvisionRx, carve-out gives the plan sponsor complete visibility and access to pharmacy claims data, contract terms and conditions and audit rights to ensure competitive rates and service performance guarantees.
- LOWER DRUG COSTS. A plan sponsor who carves-out the pharmacy benefits can seek aggressive bids from standalone PBMs to lower total cost of pharmacy benefits. Using past claims data, the PBMs can provide attractive pricing and make performance guarantees reflective of the plan’s actual claims history. As a result, the plan sponsor is able to negotiate better drug pricing, discounts, rebates, admin fees and other financial details and incentives.
- BETTER CONTRACT CONTROL. Carve-in strategies take a ‘one-size-fits-all’ approach but every plan has unique needs. Carve-out models allow for the flexibility to customize a pharmacy benefits plan specific to the plan sponsor’s needs and include important programs and services that impact overall cost, manage risk and improve clinical outcomes.
- IMPROVED DATA. In carve-out situations, plan sponsors have direct contact with the PBM and are able to receive standard as well as custom reports on claim elements. Plan sponsors can utilize combined analytics from the integration of the PBM with the medical claims administrator. This enables better trend management, more accurate forecasting and predictive modeling for more informed decision-making.
- CUSTOM CLINICAL OVERSIGHT. With insight into the pharmacy claims data, plan sponsors can tap into the PBM’s clinical expertise and deep pharmacy knowledge of formulary management, drug therapy management, new drug therapies and clinical studies. PBM clinical programs can improve adherence, mitigate fraud, waste and abuse, lower overall costs and optimize care. New drug therapies and clinical strategies are top-of-mind at the PBM and may be an afterthought in that of the insurance carrier.
- SPECIALTY PHARMACY EXPERTISE. The growing quantity of specialty drugs entering the market and the increasing number of people with multiple chronic diseases makes it even more difficult for payers to mitigate both rising spend and risk. As specialty medications continue to rise in utilization as well as cost, the PBM sits at the center of it all, seeing all pharmacy claims transactions. Since no two patient journeys are the same, having coordinated efforts between PBM and specialty pharmacies can help improve patient outcomes.
Carving out pharmacy benefits can make good sense for many plan sponsors. This strong focus on pharmacy helps reduce drug spend while improving patient outcomes. As medication costs continue to swell, the PBM is a vital link between member, prescriber and plan, providing the much-needed expertise and focus to help drive better clinical outcomes while controlling costs.