Pharmacy Benefit Repricing Games: What to Watch For

When evaluating pharmacy benefit repricings, it is easy to focus on headline savings. But spreadsheets alone don’t tell the full story. They may omit important contract details that affect a bid’s true value or reflect a false perception of a contract’s performance.

Recognizing common repricing “games” is critical for employers, consultants, and brokers who want to compare bids accurately and avoid surprises after implementation.

Pricing and Rebate Methodology

From the start, employers, consultants, and brokers should keep in mind that pharmacy benefit vendors have varying methods when creating repricings. Differences in prescription drug pricing, rebate methodologies, and omitted drugs can distort analyses and make side-by-side vendor comparisons unreliable if not clearly explained:

• Current List Prices vs. Claims-Based Pricing: Repricing claims at current list prices rather than list prices reflective of the actual claims data period can inflate the apparent value of discounts or rebates.
• Rebate Exclusions and Credits: Rebate guarantees, exclusions, and credits vary greatly from one PBM contract to the next. Some limit guarantees to a narrow list of drugs while others apply them across a broader portfolio. Without clarity on which drugs are applicable or not, projected savings may be overestimated or misinterpreted.
• Omitted Drugs: Some prescription drugs may be left out of the repricing file, particularly because the vendor expects higher list-price drugs to be used rather than those reflected in the claims data. The result, these off spreadsheet drugs give the appearance of higher potential rebate value without showing the resulting higher spend.

Drug Switching and Tier Placement

Repricings can also be influenced by how drug mix changes and tier placement are modeled (or not), which can materially affect projected savings:

• Credit for Drug Switches Already Occurring: Some vendors claim credit for savings from brand-to-generic conversions or biosimilar adoption that are already occurring organically across the market. Taking credit for these transitions can overstate incremental savings compared to others.
• Brand Drugs Placed on Tier 1: In certain cases, vendors place brand-name drugs on Tier 1 because rebates make the net cost appear lower than a generic or alternative therapy. While this approach can be legitimate, repricings often fail to fully account for the higher list price of the brand drug. The rebate value should be reflected in higher rebate guarantees, but the offsetting impact of higher gross costs is frequently understated. Tier placement changes can also affect member cost-sharing, either increasing or decreasing out-of-pocket expenses, which is an impact that is not always modeled in repricings.
• Formulary Tier Differences: Some vendors may take credit for cost share shifts from the plan to the members due to tier placement differences between one vendor’s formulary and another’s.

Program Adoption and Trend Assumptions

Repricings often rely on assumptions that can significantly influence projected savings and place financial risk on the employer group if they don’t materialize. Common examples include:

• Program Adoption: Some repricings assume 100% adoption of programs or clinical initiatives. In practice, adoption will be lower due to member behavior and provider prescribing patterns, and more variable depending on circumstances such as mail service or international sourcing.
• Trend: Overly aggressive trend projections or optimistic utilization shifts can make savings appear far more compelling than they are and never come to fruition.

Data Concerns and Fees

Incomplete data and overlooked fees can quietly inflate projected savings if not identified up front:

• Gaps in Pharmacy Claims Data: Repricings can be distorted when claims data is incomplete. Missing claims, often due to alternative funding vendors or carve-outs, can prevent analyses from reflecting the full cost of a pharmacy plan. High-cost claims that aren’t included can make a vendor’s offer appear more competitive than it truly is. Integrated discount cards can create similar distortions if their impact on claims volume and pricing is not properly accounted for.
• Omitted or Miscalculated Fees: Administrative fees, clinical program fees, and per-claim charges are sometimes omitted or miscalculated in repricings. Even small miscalculations can compound across claims over time, reducing projected savings. In some cases, fees are excluded entirely from the analysis and only surface later in the contract, creating a gap between expected and actual costs.
• Outdated Claims Experience: A snapshot in time may be better than nothing, but it’s unlikely to be representative of actual future claims experience due to changes in availability of generics, biosimilars, and/or in the utilization of brand-dominated therapies such as GLP-1s and other new-to-market drugs.

Conclusion

The best-looking pharmacy benefit spreadsheet is not always the one that delivers the lowest net cost and best outcomes for participants. While sophisticated repricing platforms can help provide some uniformity and consistency, these tools can overlook critical nuances or have underlying methodology issues. As a result, assessments might not truly reflect the terms and value of the pharmacy benefit management contract or the savings ultimately realized. Repricing exercises based on past claims is one thing; determining the best partner and contract for the future is another.

Spreadsheet and repricing tactics are sometimes paired with high commission incentives that certain advisors may prioritize. These complexities provide opportunity for manipulation, making a trusted advisor critical.

At National CooperativeRx, we review hundreds of proposals each year and have identified the inappropriate analyses or “games” that can occur. When plan sponsors, brokers, and consultants seek our guidance, we help them look beyond the spreadsheet and provide feedback that is always aligned with the best interest of plan sponsors.

Connect with National CooperativeRx today to gain expert insights on pharmacy benefit repricings, stay informed on industry developments, and explore strategies to maximize the value of your pharmacy benefit plans.