Pharmacy is the line item nobody negotiates until it is too late.
Prescription trend now outpaces medical trend at almost every group we see, and most pharmacy contracts are written in a way that makes that difficult to verify from an invoice. The contract is the product. Reading it is the work.
The definitions section is where the money is.
Pharmacy arrangements are priced on discount guarantees, dispensing fees and rebates, all of which are measured against definitions written by the party being measured. Four clauses decide whether a guarantee means anything.
Spread versus pass-through
In a spread arrangement the manager can bill the plan more than it pays the pharmacy and keep the difference. In a pass-through arrangement it cannot. Both can quote an attractive discount; only one of them tells you what the drug cost.
How a generic is defined
Discount guarantees are measured separately for brand and generic drugs, and the contract decides which list a drug sits on. Reclassifying a handful of high-volume drugs can satisfy both guarantees while the plan pays more.
What counts as a rebate
Rebate guarantees are usually stated per brand script and exclude whole categories — specialty, limited distribution, sometimes anything dispensed through a particular channel. The exclusions, not the guarantee, determine the check.
A handful of claims can move a renewal more than plan design does.
Specialty and high-cost therapies are where pharmacy stops being a predictable line and becomes underwriting. They need to be tracked as they develop, not discovered in the renewal letter.
Track the outliers early
A high-cost therapy that starts in month four is something you can still plan and negotiate around. The same therapy found at renewal is a number you absorb.
Weight-management and other fast categories
Categories can move from marginal to material inside a single plan year. The decision to cover, to cover with criteria, or to exclude is a budget decision and an employee-relations decision at once, and it should be made deliberately rather than by default.
Carve-out, honestly assessed
A separate pharmacy arrangement can save real money and can also cost you integration, data and leverage on the medical side. We model it rather than advocate for it.
Pharmacy brings filings with it, and they are easy to miss.
Prescription drug data reporting
Group health plans are required to submit annual prescription drug and health care spending data. It is a plan obligation, usually executed by vendors, and the plan sponsor remains responsible for it having happened.
The gag-clause attestation
Plans must attest annually that their contracts do not restrict access to cost and quality data. That attestation is a statement about your pharmacy and network contracts — which means somebody has to have read them.
Creditable coverage
Whether your drug coverage is creditable against Medicare Part D drives a notice obligation with no employer size exemption: to individuals before October 15 each year, and to the agency within sixty days of the plan year start.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.
Bloomfield Hills, MI 48304
248.370.8853
719.425.2649
281.404.5670
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