Moving Beyond the Spreadsheet in Measuring Pharmacy Benefit Value

Many experts have stated that the prescription drug chain is complex and confusing. However, there seems to be a growing divergence of messages in the marketplace on how the pharmacy benefit is valued.

Adding to the complexity is finding an authentic and transparent calculation to measure value tangibly. For example, is the value measured or modeled by the lowest net drug cost on a per prescription or per member per month basis, by total health care costs spend reduction when the benefit includes medical and pharmacy combined under one insurer, or by clinical pharmacy programs with inferred medical savings?

It is apparent that although there are a myriad of experts, there is a lack of unity in the message of measuring value.

To understand the disconnect, we must first understand how the pharmacy benefit is currently valued. The pharmacy benefit is currently valued through claims repricing that applies discount and rebate guarantees to historical utilization.

This value model has two assumptions—that utilization (drug mix and claims volume) will remain unchanged. If utilization does change, it will be the same regardless of the pharmacy benefit manager (PBM) selected.

This current modeling process is frequently called spreadsheeting. This model directly contradicts the message of the experts within the market that value is measured through the lowest net drug costs, by spend reduction when the benefit includes medical and pharmacy combined under one insurer, or by clinical pharmacy programs with inferred medical savings. How do we make sense of this?

When it comes to cost management strategies, not all PBMs are created equal. Asking how formulary and clinical programs are applied and measured is a crucial component when selecting a PBM.

One must look beyond the spreadsheet because calculating the value of pharmacy benefits is more than just discounts and rebates. Measuring value should also include several parameters, including how clinical programs are designed, implemented, assessed, how information and data are used for formulary and utilization management, strategies and guidelines for coverage for authorized brand alternatives, biosimilars, and selecting brand drugs over generic equivalents.

Plan sponsors deserve to know what measurable value they will receive when selecting a PBM. When measuring this value, plan sponsors should have access to transparent insights, data-backed analytics, reporting capabilities, and the ability to quickly and easily compare PBMs. It is time to measure true value with real and transparent pharmacy claims data that go beyond the spreadsheet.

About the Author

Thatcher Sloan, Vice President, Practice Leader, at Confidio has worked with employers and health plans across multiple geographic regions and lines of business. This allows him to bring actionable solutions that are tailored to meet the specific needs of his clients based on industry best practices. Thatcher’s expertise is at the cross section of strategy and operations enabling him to develop solutions that are operationally sound, align and work inside the clients’ entire healthcare program. His clients have included Fortune 500 corporations, commercials business, Medicaid plans and large and small employers.