Traditional model PBMs usually do not charge an administrative fee.
They make their money in other ways. Network spreads, rebate retainment and their mail order operations. The biggest PBMs operate in this manner, have sophisticated programs and are quite experienced. The downside is you don’t know how much money they are making.
Transparency model PBMS attempt to pull back the curtain a little and “show” the client/broker where they are making money. Some PBMs even offer a “pledge” of transparency. However, the definition of transparency is often more of a PBM specific one though.
Transparency AND Pass thru PBMs charge an administrative fee and claim that is their only source of revenue. There are no network spreads, the client gets ALL of the rebate and rebate related revenue, and often these PBMs do not own their own mail order facilities. Since there is no incentive for Transparent and PASS THRU PBMs to collect rebates, their formularies may reflect more cost-effective choices and are not “rebate driven.”
Get help when negotiating or reviewing PBM contracts. PBM contracts like the process they represent are quite complicated and can be confusing. Contracts can be worded in such a way to misrepresent what might happen and how. Having an experienced PBM consultant with years of experience in how PBMS operate is critical to success in such a complicated environment. Be careful when evaluating any incentives or implementation credits offered by a PBM. Any money paid out in this manner has to be recouped somewhere.
Look at the history of recent implementations for any PBM you may choose. Verify how they implement a new client and review any implementation plan they bring forward. Challenge any areas that don’t make sense. Determine how well they communicate to members and clients regarding the process of implementation. In short, don’t get “cookie cuttered.”
Make sure you can audit your clients PBM contract with an auditor of YOUR CLIENTS or YOUR choice. The only way to assure your client of ongoing compliance to a contract and financial safety is to have the ability to audit a PBM contact in an ongoing manner.
Finally, don’t get caught up looking at the individual components of a PBMs offer. AWP and the discount off of it can be deceiving and on the surface may look great, but the PBM may be in essence “buying down,” the AWP to look good and then making money somewhere else.