12 Questions to Ask Your PBM to Ensure Transparent Pricing

In the world of pharmacy benefit management (PBM), transparency is becoming an increasingly important topic - and one that is receiving a lot of attention. With inflation, rising healthcare costs, and a growing demand for accountability, employers are seeking clarity in the pricing models used by PBMs. Transparent pricing means more than simply understanding what you’re paying for - it’s about making sure that you have access to the data and reporting needed to make informed decisions that benefit both your organization and its employees.

In this blog post, we’ll cover why transparent pricing is essential when choosing a PBM, what transparency really means, the questions you should ask to ensure your PBM is fully transparent, and the benefits you can expect from partnering with a modern, transparent PBM.

What Does Transparency Mean When it Comes to PBMs?

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So, what exactly are we referring to when we talk about transparency? When it comes to PBMs, transparency refers to the level of visibility and access employers have to the pricing structures, rebates, administrative feeds, and methods used to determine those costs. To understand the importance of transparency, it’s important to know how PBMs operate and structure their pricing.

PBMs typically act as intermediaries between employers, insurance companies, and pharmacies. They negotiate drug prices with manufacturers, manage pharmacy networks, and process claims. While PBMs are expected to pass on the savings they negotiate, the manner in which they do so - and whether those savings are passed on to the employer or not - further reinforces the need for transparency and accountability.

Here are some key aspects of PBM transparency:

• Pricing Structure: This refers to how the PBM determines the price of prescription medications. In a spread pricing model, the PBM marks up the cost of drugs, keeping the difference (the spread) as profit. In a pass-through model, the PBM passes the actual cost of the drug - and the savings - directly to the employer without applying a markup, providing more clarity around the price paid.
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• Negotiation with Manufacturers: PBMs negotiate rebates and discounts with drug manufacturers. A transparent PBM will clearly report the exact impact they have on the overall cost of the plan.
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• Fees: PBMs often charge administrative fees for managing prescription drug benefits. Transparent PBMs will provide a clear breakdown of these fees, making them easy to understand.
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• Cost Saving Care Opportunities: There are various opportunities for employers to save money, such as through formulary management or promoting the use of less expensive generic drugs. A transparent PBM will openly share these opportunities and how they are leveraged to reduce overall drug costs.

The Top Questions to Ask Your PBM to Ensure Transparent Pricing

Transparency in PBM pricing comes in various forms. It not only offers better visibility into the cost structure but also helps employers make the best decisions about their pharmacy benefit plans. Transparency also means that you are given access to detailed information on how savings from manufacturer rebates, discounts, and drug pricing negotiations are handled and passed along.

When evaluating PBMs, it's essential to ask the right questions to ensure that you’re getting the full picture when it comes to pricing. Here are the top questions to ask to ensure transparent pricing:

1. What pricing model are you under?
Is the PBM using a spread pricing model or a pass-through model? A pass-through model is typically more transparent, as it directly passes the cost of drugs through to you, without hidden markups.

2. How are rebates calculated and applied?
Are rebates negotiated with manufacturers and passed on to your plan? How are they applied to your overall drug costs? Is it 100% pass-through or not?

3. What are the administrative fees and other fees included in my plan costs?
Ask for a breakdown of all fees, including any fees for network access, formularies, or claims processing. Are there any hidden or unexpected fees?

4. Can I see how the final price is calculated?
Request to see detailed breakdowns of drug costs, including base pricing, any markups, rebates, and fees. A transparent pricing model means you have access to this information at all stages of the process.

5. Does my contract have minimum guarantees for pricing components and rebates?
What kinds of contract guarantees do the PBM have? Does it have pharmacy network guarantees? What about manufacturer rebate payment guarantees? Ensure that the PBM guarantees certain pricing structures or rebates for your plan, helping you avoid unexpected cost increases.

6. What is the process for verifying if claims have been accurately priced?
Ensure that there’s a clear and easy process for verifying pricing accuracy, including any discrepancies that may arise.

7. How do I access claim details and pricing information?
Ask about how you can access data on claims, pricing, and savings in real-time. Can you get detailed reports or dashboards that provide insights into drug costs and overall plan performance? Is the reporting in real-time?

8. What tools do you offer for monitoring spend and performance? Are there dashboards or reports I can access?
Transparent PBMs often offer tools like dashboards that allow employers to track spending, claims, and overall plan performance. Make sure you have access to these tools and can easily interpret the data.

9. Am I able to see the invoices and payments made to pharmacies and vendors?
Having access to invoices can help you understand how much is being paid to pharmacies and vendors, ensuring that there are no surprises in your billing.

10. What are the criteria for your formulary and drug selection?
Transparency also extends to how drugs are selected for your formulary. Are the criteria for formulary decisions clear? Are generic options prioritized?

11. How do you ensure your practices are aligned with industry best practices and regulations?
Transparency means following industry standards and regulatory guidelines. It’s not enough for a PBM to simply claim compliance; they should demonstrate a commitment to ethical standards and accountability. Is your PBM fiduciary-aligned? How are you ensuring compliance with the latest regulations?

12. How do you address pricing issues and discrepancies?
If there are discrepancies in pricing, how does the PBM resolve them? Ensure there’s a process in place to handle these situations efficiently and fairly.

The Benefits of Transparency Pricing

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Partnering with a transparent PBM provides several significant benefits for employers. Transparency not only helps in building stronger relationships but also allows for better strategic decisions in managing pharmacy costs. With clear pricing structures and insights into  your drug spend, you can ensure that your organization is getting the best possible value out of this relationship.

Let’s take a look at some of these benefits:

• Trust: Transparency fosters trust between you and your PBM. When you can see exactly how pricing is determined and how savings are passed on , you’re more likely to have confidence in your PBM.
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• Cost Savings: Transparent pricing can help you reduce pharmacy costs. By understanding where your money is going, you can identify potential savings opportunities, such as switching to generics or making the most out of your plan’s formulary.
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• Informed Decision Making: Transparency gives you the data needed to make informed decisions about your pharmacy benefits program. When you can easily access pricing details, you’re empowered to make the best choices for your organization.
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• Improved Vendor Accountability: With transparent pricing, your PBM becomes more accountable for its pricing and services. When all costs are laid out clearly, it’s easier to assess whether your PBM is working to ensure the most cost-effective options are available to you.

The Power of Transparent Pricing with SmithRx

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In today’s healthcare landscape, transparency is no longer just a nice-to-have - it’s a must! Employers who prioritize transparent pricing can ensure they are making informed decisions that not only save money but also build trust and drive efficiency in their benefits programs. By asking the right questions and partnering with a modern, transparent PBM, you can gain a clear understanding of where savings are coming from.

At SmithRx, we are big on transparency. We ensure that any revenue we receive from drug rebates is passed directly back to you - with no hidden fees or markups. We are committed to providing full visibility into every aspect of your pharmacy benefit plan and offer cost saving programs like our Connect 360 and robust account and member support to help optimize your PBM experience. With SmithRx, you don’t just get lower prescription drug costs, you get a partner who works in your best interest, helping you realize maximum savings.

Ready to unlock the power of transparent pricing and elevate your PBM experience? Connect with us today to discover how we can help your organization achieve the savings and efficiency it deserves. We’d love to hear from you!