New Three-Year PBM Contract Yields Significant Savings for Self-Funded Plans

Josh Bindl  •   May 25, 2021

At the heart of any joint purchasing arrangement is a strong contract. The optimal balance of maximizing benefits and controlling costs cannot be achieved for a self-funded plan sponsor without a solid contract from a pharmacy benefit manager (PBM).

With 2021 being the final year of a three-year contract, National CooperativeRx hired an independent consultant to take the Cooperative’s 375,000 lives to market. This process is extensive and key to securing the industry-leading contract our members expect and deserve.

Our Request for Proposal (RFP) generated responses from eight PBMs including the three largest, smaller PBMs, new models and “transparent” PBMs. Our focus was to achieve greater discounts and contract terms, especially in the growing area of specialty medications. In addition to negotiating discounts and rebate guarantees, the RFP process reviewed 98 different contract terms and methodology elements to remove or prevent PBM games. After this extensive process, National CooperativeRx signed a new three-year contract with CVS Caremark.

Cost Containment Estimates

As marketplace dynamics have grown more complex, group level savings estimates can vary greatly by utilization mix, plan design and elected management programs. Future planning using these savings estimates need to keep these variables in mind. Much like prior negotiations, a significant portion of the savings is in additional rebate guarantees. The Cooperative’s 100% rebate pass-through generates significant value because of the rebates achieved by the PBM. However, there is the standard delay in collecting and remitting these rebates to members. With these caveats, we have seen groups with savings estimates in the double digits.

PBM Exclusivity

In recent RFPs, the Cooperative has weighted the value of PBM exclusivity versus the opportunity for membership to pick between multiple PBMs. In this RFP, each PBM indicated its pricing was reflective of being the sole PBM and contract value would diminish if multiple PBMs were selected. We determined the cost of multiple PBM offerings outweighed the benefit at this time and we will continue to consider this option for the future.

Timing

The current National CooperativeRx contract with CVS Caremark expires December 31, 2021. As one of the final points of negotiation, CVS Caremark offered the ability for groups to put this new pricing in place October 1, 2021. Signatures must be obtained by August 1, 2021. Groups who take advantage of this pricing improvement can help offset 2021 trend in addition to 2022.

Additional CVS Caremark Resources

Unmet customer service expectations continue to be a PBM theme we hear in the marketplace, especially with customers of the largest PBMs. In this RFP, there is a commitment from CVS Caremark for additional account management resources to maintain a high level of customer service as the Cooperative continues to grow. For new members, there is also a commitment on additional implementation resources. The process for onboarding these additional resources has already started.

National CooperativeRx Oversight Efforts

A core function of National CooperativeRx is to provide oversight over the PBM and audit the achievement of contract terms. In addition, we continue our ability to use our independent expertise to manage pharmacy benefits through various clinical oversight programs. These oversight programs remove significant fraud, waste, and abuse out of pharmacy benefit spend.

Another part of this RFP process was the analysis of various PBM strategies to confirm alignment with the best interest of patients and plan sponsors. As these strategies continue to develop, the Cooperative gained commitments on continued transparency and data, and can reject certain strategies should they be found contrary to the best interest of our members.

We look forward to working through the process to renew each of our members on this new contract. Please reach out to your National CooperativeRx account representative if you have questions along the way. When all the smoke and mirrors of this industry are clear, we know our value will exceed others because we have our members’ best interests in mind.