Rx for Healthcare Costs? ‘PBM, here’s what we’re willing to pay …’

Haas, who is vice president of Wells Fargo Pharmacy Consulting, spoke to BLR about the problem of generic drug pricing.

To attack the problem, Haas and his team at Wells Fargo created a unique procurement strategy. “About 4 years ago, we listed every generic drug—and there are about 2,750 of them—by their specific identifying codes. We went through an RFP process. We said to the marketplace, ‘Here’s what our customer looks like and is willing to pay for generic drugs. We also want to know what your AWP is for brand and specialty drugs.’ Then we said, ‘Are you able to meet these price points?’

“We began seeing a separation of the market; a number of the more traditional PBMs said, ‘No, we choose not to participate.’ But we also had a number of PBMs step up and say, ‘Absolutely, we’ll play, and we’ll meet these price points.’

“So immediately we began seeing competition in the marketplace,” Haas says. “We are able to have multiple PBMs competing for the right to serve our customers by meeting the procurement strategy requirements.”

These days, the RFPs are done a little differently, Haas reports. “When we put our RFP out to the market now, we don’t include the pricing that our client is willing to pay; we just leave it blank and request the PBM respond with the price they’re able to guarantee as the maximum allowable charge for these pills. So now when we put an RFP out on the street, we’re continually seeing the competition driving the price points down.”

Workforce Meltdown coming? Experts say “Yes” and HR better say “Ready.” What to do? Start by reading our complimentary HR White Paper, Talent Acquisition 2013: Hire the Best and Spend Less Doing It!  Download

Substantial Savings Are Possible

How far down do the prices go? Haas says their typical client enjoys substantial savings. “As a rule, what we’re seeing is anywhere from about $100 to as high as $150 per employee per year onetime savings,” he says. In addition, he says this approach mitigates trend cost increases, typically resulting in a negative or zero trend for an extended period of time.

Ongoing savings are substantial, too. He illustrates the point using an employee who has type 2 diabetes, high blood pressure, and high cholesterol. “During the course of a year under a normal PBM contract structure, this person’s medications will cost about $3,000 a year. But when you fix the mechanics and the underlying pricing, it lowers that cost, on an annual basis, from $3,000 down to $300. That’s how much potential savings exist.”

The savings are both for the plan and for the employees, who may become more adherent to their doctor’s orders, simply because they can now afford to pay for the medications. This is especially true when companies are using high- deductible health plans as a means of containing costs.

Ready for the recruiting crunch as Boomers retire? Download our free white paper Talent Acquisition 2013: Hire the Best and Spend Less Doing It!

Sound Good to You?

Haas suggests that you take a look at your PBM contract. “Look at how the cost basis of generic drugs is defined, and if it says ‘AWP,’ you need to take action.” And don’t think you have to be big to take advantage of this new methodology.

“It doesn’t matter how big you are as an employer,” he says. “What matters is how big the PBM is that we can align you with, because the pricing will depend on their size, not the employer’s. We have clients of 100 employees who have better overall PBM pricing than many of the large purchasing coalitions that represent in excess of 1,000,000 members.”

Seems like there’s no end to HR’s challenges, but at least we’ve got free help for one of the biggest of them—the so-called “workforce meltdown.” That is, the the clash between a diminishing supply of qualified workers and the explosive increase in demand for the few who are available.

Data from the Bureau of Labor Statistics show that:

• Between 2010 and 2020, 70 million Americans will retire, while only 40 million will enter the workforce.
• By 2020, the key age group of employees (aged 25 to 44) will shrink by 3 percent, while those aged 55 to 64 will grow by 73 percent, and those aged 65 and older will grow by 54 percent.

Not surprisingly, the resulting competition for highly skilled “knowledge workers” will mean fierce competition in pay, benefits, flexible work arrangements, and workplace amenities.

How to prepare your company? Read this free whitepaper Talent Acquisition 2013: Hire the Best and Spend Less Doing It. (Special thanks to our sponsor, ICIMS, who made it possible for us to offer this valuable white paper you at no charge.)

You’ll get these tips and more:

• Designing a recruiting strategy for the coming scarcity of trained workers
• How to get the most out of traditional methods of talent acquisition
• Diving into new talent pools
• Secrets of successful online recruiting
• Using blogs and social networking sites for recruiting
• Finding out what motivates candidates
• Generating referral networks.
• Developing effective employer branding

Download the free white paper.

Again, thanks to our sponsor, ICIMS.