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Campus Pharmacy Benefit Management Partners

University Business, May 2011

Universities are often in a unique position when it comes to managing their pharmacy benefits. Those associated with medical schools, hospital, and clinics often have affiliated pharmacies and access to staff with clinical pharmacy expertise. If an institution can fully leverage these in-house capabilities, it can have a dramatic effect on its overall pharmacy benefit budget. How to best leverage these capabilities should be considered when HR administrators selects a pharmacy benefit management (PBM) partner.

Consider seeking PBM options that provide flexibility and decision-making authority. Universities that choose to be more self-directed can explore the following options:

Universities often have their own affiliated pharmacies that may be under-utilized by the plan’s membership. Increasing the volume of prescriptions filled at these affiliated pharmacies is another way to lower the institution’s overall drug spend and lower membership costs.

PBMs can offer flexible program management that enables the university to drive patient traffic to its affiliated pharmacies, including:

- A plan design that allows lower copays for patients when they frequent those pharmacies.

- Utilizing the university’s affiliated pharmacies to provide mail order services and fill specialty prescriptions.

Additional savings may also be available through a 340B/GPO “Own Use” program, by taking advantage of higher discounts offered through participating 340B/GPO contract pharmacies.

The flexibility to use its affiliated pharmacies for retail, mail, and specialty prescriptions allows for enhanced pricing and savings for the institution. Promoting the use of university pharmacies through plan design encourages participant usage and contributes toward additional member cost savings. In addition, people can visit pharmacies close to where they work, making filling prescriptions more convenient.

A copay differential can be created for employees who use pharmacies within the contracted 340B/GPO network.

Pharmacy benefit management partners can often implement a phased approach. For example, at the outset, it may make sense to merely drive retail prescriptions to the affiliated pharmacies, and then transition mail order and specialty prescriptions at a later date.

When a university's staff is involved in the formulary process, institutions are often better able to garner support from employees and other key stakeholders.

One U.S. university recently collaborated with a PBM, resulting in optimized use of outpatient pharmacies. The institution implemented a tiered plan design; copays for all levels of drugs are lower at the university’s pharmacies. Employees now have a financial incentive to visit those pharmacies. Administrators developed a select list of generic medications that are available for $1 a month and $3 for three months. These copays are available only at the university’s pharmacies. University employees are thus encouraged to visit university pharmacies and to use generic drugs. The plan requires that specialty drugs are available only through the university’s pharmacies. Mail order drugs are available only through the university’s mail facility. Customized member welcome letters and benefits booklets were used to communicate the plan design.

The increased use of these pharmacies has helped this university lower costs through deeper discounts and use of generic alternatives.

Another option for pharmacy benefit self-direction is for a college or university to have the ability to customize its formulary to any extent needed. Some universities are fortunate to have access to pharmaceutical expertise—from medical centers and in-house pharmacies—that aid them in the ability to drive formulary decisions and customize their formularies. These institutions can leverage the expertise of their clinical staff and essentially develop their own Pharmacy & Therapeutics (P&T) or Formulary Committees that the PBM supports. A PBM’s P&T committee typically is the governing committee in the formulary process and makes decisions regarding drug therapy.

Thus, the university’s formulary can be customized to its unique needs, leveraging the expertise of the university staff and the PBM. In addition, when the PBM partners with a university client to create its own P&T Committee, the university can ensure first-hand that the make-up of the formulary has the university’s best interests at heart. When the university’s staff is involved in the formulary process, institutions are often better able to garner support from employees and other key stakeholders—and are better able to reach savings goals.

The national PBM and university described above also worked together to target a clinical and formulary strategy specific to the employee population. This collaboration enabled both organizations to craft a framework in which the university could achieve control of its formulary via the following tailored approach:

1. The PBM’s P&T Committee meets quarterly. The university’s medical director participates in these meetings and experiences the diligence that is involved with each formulary decision.

2. A team of clinical and other PBM staff compiles and summarizes the decisions made during the PBM’s P&T Committee meeting and customizes the recommendations to the university.

3. The university’s Formulary Review Committee meets. The PBM summarizes what occurs during the P&T committee and answers any questions raised. Utilizing the documents provided by the PBM, the university’s Committee reviews all of the formulary decisions and considers the health, efficacy and economic ramifications specific to the university.

4. The committee decides which formulary decisions it wishes to implement.

The PBM that manages this university’s benefits allows complete disclosure of its formulary operations, including detailed, client-specific pharmacoeconomic modeling, and provides the university the flexibility of making customized formulary changes. In this scenario, all parties involved know the reason for, and the tier placement of, drugs on the formulary

In sum, this university now directs its own pharmacy benefit destiny. Through its partnership with its PBM, the university is able to control its pharmacy benefit plan at any level desired. The university also has achieved extraordinary savings using this benefit management strategy.

Overall, there has been a decrease in drug spend and member costs, and an increase in generic utilization. Cost savings to both the plan and its membership have been significant—without compromising patient care. These outcomes provide a true example of savings through collaboration and partnership.

A key decision point for others looking to move in this direction includes the selection of the correct PBM partner. There are multiple PBM options from which to choose and often the selection process can become overwhelming. Nonetheless, an easy first step is to understand the business models of the various PBMs and decide which model best matches the university’s needs.

  • A traditional PBM offers a very low or no administrative fee in exchange for retaining pricing spreads and rebates. It is not in the traditional PBM’s best interest to allow clients formulary flexibility, for example. The traditional PBM may also maintain its own mail order, specialty and/or retail pharmacies?and therefore, has the incentive through higher profits to move as many claims as possible to its facilities. The PBM may discourage or, in some cases, prevent clients from using their own pharmacies.
  • A translucent PBM offers a low administrative fee, but often conceals some revenue streams and retains some spread. The translucent PBM is also motivated to reward formulary and/or rebate decisions contrary to its clients’ best interests. More control is afforded universities through this type of PBM, but alignment of goals still isn’t absolute. Goals continue to be aligned with the PBM’s profitability, and thus, limited flexibility is available.
  • A full pass-through PBM offers a higher administrative fee, but conceals no revenue streams and retains no spread. The only money the truly pass-through PBM earns is through its administrative fee. Forging a collaborative partnership with a pass-through PBM can allow for self-direction by the university, while simultaneously leveraging the expertise of the PBM staff.

Brent Eberle is vice president of Clinical Pharmacy Services at Navitus Health Solutions,