Additional Employer Guidance

Additional Employer Guidance

Integrating Medical and Pharmacy Data

In moving towards pharmacy and medical benefit integration, an employer should consider asking a minimum number of questions of their plan as well as their prospective or current vendor. This will help to compare as well as match up against what a comprehensive benefit strategy for a company may look like. Gaining insight from your own claims data can go a long way in optimizing your health care dollar spend and providing the right coverage for your covered population.

When making changes to the medical or pharmacy benefit, consider incorporating the same questions during your internal deliberations as well as in any of your RFI, RFP or a finalist presentation. Making certain that coverage is clear, clean and consistent as part of vendor contract reviews is part of a well determined benefit strategy.

Specialty drug selection, coverage and claims adjudication represents key data that needs to be captured for integration between medical and pharmacy benefits.

Key questions that address integrated data needs

  • Is there consistency in the language and design to assure the most optimal coverage plan and out-of-pocket costs exist
  • Is there consistency in patient cost sharing between the medical and pharmacy plan? 
  • Is there a mandate on the use of specialty pharmacies for patient-administered specialty drugs?
  • Is there a requirement to use a single specialty pharmacy or do they allow multiple specialty pharmacies?
  • Does the PBM use specialty pharmacy case or care managers for overall patient management as well as drug adherence programs?
  • Are there specific specialty pharmacy adherence programs in place or planned for the near future?
  • Are cost share differentials used to encourage use of specialty pharmacies?
  • Are ongoing refills mandated to maximize member benefits from these drugs?
  • Will the PBM provide your company with all of the data needed to track outcomes (e.g. cost, clinical)?
  • Are vendor partners in agreement concerning performance guarantees for important contract terms such as patient safety, first time service accuracy of clinical, financial, and administrative functions and compliance with audit requirements?

Auditing PBMs

A comprehensive PBM audit can help identify cost savings opportunities and ways to enhance your existing benefit strategy. The following provides a general overview of the types of reviews and audits that are available to support employer efforts:

Operational Reviews

This type of audit typically covers:

  • Accuracy of discounts provided
  • Accuracy of eligibility and plan benefit administration
  • Duplicate payments
  • Contract compliance
  • Retail (including specialty) and mail-service dispensing fees
  • Formulary savings and rebates
  • Pricing formulas
  • AWP discounts
  • Maximum caps
  • Brand versus generic usage

Plan Performance Evaluations/Audits

They provide a more in-depth analysis of cost drivers, utilization patterns and PBM value, while providing the opportunity to assess potential savings that can be realized through benefit design changes utilizing alternative co-insurance or co-pay structures, generic and mail order management tactics. 

Pharmacy Benefit Audits

These audits may include a fixed fee and/or a performance fee component. The fixed fee payment for executing on specific audit criteria that should be proposed by an employer includes the following:

  •  Claims audit re-adjudication/evaluation fees on a per claim basis, unless otherwise indicated. Auditor must include all of the following benefit program elements in the per claim fee:
    • Administrative and clinical fees
    • Loading of eligibility, pharmacy claims data and other files o Benefit design (formulary, co-pay, networks, etc.)
    • PBM programs (quantity level limits, step therapy, prior authorizations, etc.)

The performance fee payment component is based on a percent of dollars recovered by the employer/plan sponsor from the PBM, ASO or integrated health plan managing the pharmacy program.

A Pharmacy Benefit Audit can result in recommendations or savings opportunities that may include:

  • Formulary Savings – Determines economic effectiveness by comparing related savings with projected or guaranteed savings
  • Rebates – Identifies rebate claims that need to be issued
  • Co-payment Applications – Identifies claims with plan co-payments that have not been accurately calculated and charged
  • Pricing – Identifies claims in which pricing formulas have not been appropriately applied
  • Administrative and Dispensing Fee Applications – Insures that administrative, related charge-back and dispensing fees are applied properly
  • Brand vs. Generic Usage – Identifies claims in which cost-saving generic drugs aren’t being used
    • Average Wholesale Price (AWP) Discounts – Insures appropriate and accurate use of AWP and related discount formulas or methods
  • Fraud and Abuse – Identifies fraudulent and abusive claim submissions involving patients, pharmacist providers and prescribers; also identifies patients who are potential addicts or abusive users
  • Medical Consistency – Identifies pharmacy claims that misuse medical diagnostic or treatment codes
  • Proactive vs. reactive review of newly launched drugs against employer plan exclusions
  • Use of compounded drugs

Depending on the type and scope of the pharmacy audit to be done, it can take from 6 to 12 months to complete. Recovery of funds from the PBM may take longer or result in a protracted arbitrator or legal battle depending on the pharmacy benefit vendor agreement.

The Role of Rebates

A key component in addressing PBM transprency is the issue of drug rebates. In recent years, rebates for specialty drug products have declined compared with traditional drugs and will rebound when multiple products in a category are available. This has happened with interferons, growth hormone, and in some chronic care conditions such as MS, RA, and cancer. Medical benefit-related rebates are still the most contentious. Rebate amounts for specialty drugs vary and it is unknown what effect, if any, biosimilars will have in this category. While rebates are not available for a majority of biologic drugs, the market is shifting as the pipeline for specialty products increases. Keep in mind that supply chain contracts change rapidly and market drivers can shift opportunities for rebates during a single year. This makes it increasingly important for employers to understand how rebates are handled by their PBM or health plan. They should not assume the savings associated with specialty drugs will be passed on to them entirely or even in-part.

PBMs vary on their willingness to share rebates and many defend retaining them as a way to cover the costs of services that require more direct interventions and patient care, or base their decision just on the relative size of an account. This is why contract terms and conditions are so important to know up front to avoid surprises later.


Employers should also look at potential  savings (rebates or other manufacturer discounts) under the medical benefit where office-administered agent (OAA) drugs are billed. In the medical office supply chain there are distributors or wholesalers like on the pharmacy side and some drugs can be available through either direct contracting with the provider or through select specialty pharmacy vendors, which are typically not PBMs.

Employer Case Study

This case study, focused on setting vendor expectations, represents a Midwest-based employer with approximately 20,000 employees. They provided examples of steps they require their PBM to use for new and existing patients, pharmacy care management for prior authorization review and an overview of their communication strategy.

View Employer Case Study