Dec 17, 2020

Among the many types of audits, an annual audit of PBM contract pricing guarantees is (and should be) a standard part of a plan sponsor’s pharmacy ben-efit program. As such, what are the key variables that determine the success or failure of this audit?

There are many, including the auditor’s competency in understanding and taking into account which PBM contract terms, conditions and definitions impact the audit results. This means that the work necessary for an audit’s success starts with negotiating these terms, conditions, and definitions to maximize potential recoveries while staying out of disputes with the PBM.

On the other hand, there is no other area that is as rife with ambiguity as Specialty Drugs, the greatest financial pain point in pharmacy benefit costs.

There is no clearly defined classification refer-ence for Specialty Drugs, including what is or isn’t classified as such. Three example classes of drugs that may be classified as either specialty or non-specialty are HIV, transplant, and PCSK-9 medications. To complicate matters either fur-ther, there are three classes of Specialty Brand Drugs—Brands, Limited Distribution Brands, and Exclusive Distribution Brands. Each of these will
have different discount guarantee levels, typically ranging from AWP -3% to AWP -22%.

Since there is no industry standard like MediSpan for Specialty Drugs, PBMs may define them with as much as a 40% variance. Imagine the impact on a pricing guarantee if 40 out of 100 Specialty Drug claims are allowed to process at an 11% discount instead of a 22% discount. At an average cost of $60,000 per year, a plan sponsor is paying an additional $6,600 per year for every drug that is classified as Limited Distribution instead of non-limited distribution. It doesn’t take long for this to become significant wasted dollars. This is just one example of many involving “leakage” in the reconciliation of PBM contract pricing guarantees.

The bottom line? The starting point for an effective audit is your PBM contract, so ask your pharmacy benefit consultant to review it and highlight the terms, conditions, and definitions that impact the pricing guarantees, and why they are effective in preventing an ineffective audit.

John Adler, President
ELMCRx Solutions