Corporate, union and government health plans all can gain better control over prescription coverage costs by securing better PBM (Pharmacy Benefit Management) contracts. And, better contracts result from better Request For Proposal (RFP) processes. Yet, very often the RFP process is flawed and so too is the resulting contract. Here are several steps to help craft an RFP that will find the best PBM for your company.

Fine Tuning an RFP

1. Select a consulting firm that can honestly and effectively represent you. Some consulting firms offer to represent employers while at the same time maintaining financially-lucrative relationships with PBMs. How can you be confident that such consultants always will work in your best interest? You can and should require a written statement disclosing any relationships your consultant has with PBMs. And, while honesty is essential, it isn’t enough. Your consultant must possess the technical, industry and legal expertise to execute effective contracts on your behalf. The consultant should be one that specializes in prescription drug programs, not a generalist.

2. Make sure this firm secures verifiable information from contestants. Invariably, the RFP your consultant uses to help you select a PBM from a pool of contestants will include a questionnaire meant to define their past performance and project their performance for you. Yet, many such questionnaires fail to ask for verifiable documentation of the contestants’ responses. So, the contestants are free to make claims they can’t back up and promises they have no intention of keeping. Take great care in making sure your questionnaire is well designed to secure verifiable information and guarantees that can set top performers apart from the rest. verifiable and prices are contractually binding.

3. Make sure pricing provided by contestants is contractually binding. Poorly crafted questionnaires not only result in unverifiable claims, but also in only projected pricing. Price projections are not enough: you need contractually-binding prices. Therefore, in addition to a questionnaire, you need your contestants to complete a proposed contract that, most importantly, includes price schedules for both common pharmaceutics and a full range of specialty drugs.

PBM Selection and Contract Execution

1. Select semi-finalists based upon verifiable information and guaranteed pricing terms. With the verifiable information and guaranteed pricing terms you secure through your new, more-stringent RFP process, you can effectively analyze the pros and cons of each contestant and whittle your contestants down to three to five semi-finalists with whom to enter into negotiations.

Contestants that can’t or won’t agree to your terms should be eliminated. The PBM’s you want to work with will be able to withstand an upfront level of scrutiny.

2. Negotiate with each semi-finalist to secure the most favorable terms. Corporate, union and government health plans choose the PBM they want to work with, then negotiate the terms. This is backwards. Negotiate with each of the semi-finalists to secure the best possible terms, and make sure these negotiated terms are documented in the contract.

3. Sign your contract simultaneously with announcing the finalist. The final step is all about timing. You are best served by announcing the finalist only when there is also a completed contract ready for signing. Sign that contact right there on the spot. That way everything is in writing and there is an iron-clad agreement before you are ever in a one-on-one relationship with the PBM.

RFP and PBM contract execution can raise additional questions. Arxcel account managers are available to walk you through the whole process and answer your questions at no-cost and no-obligation.

AWP lawsuit settled, drug prices expected to drop

Eleven major pharmaceutical companies recently agreed to a $125 million nationwide settlement in a 2002 lawsuit alleging illegal pricing practices.

The suit targeted the companies’ practice of illegally inflating the Average Wholesale Price of their drugs, published in several independent publications based upon information provided by the drug manufacturers.

Medicare, Medicaid and third party payers, such as insurance companies, reimburse pharmacies and physicians for drugs they provide based on the AWP. Individual patients also pay out-of-pocket on this basis.

Included in the settlement are Abbott Laboratories, Amgen Inc., Aventis Pharmaceuticals Inc., Hoechst Marion Roussel, Baxter Healthcare Corp., Baxter International Inc., Bayer Corporation, Dey, Inc., Fujisawa Healthcare, Inc., Fujisawa USA, Inc., Immunex Corporation, Pharmacia Corporation, Pharmacia & Upjohn LLC, Sicor, Inc., Gensia, Inc., Gensia Sicor Pharmaceuticals, Inc., Watson Pharmaceuticals, Inc., and ZLB Behring, L.L.C.

Aranesp, Epogen, Neupogen, Neulasta, Anzemet, Ferrlecit and Infed are among the drugs included in this settlement.

Pharmaceutical companies GlaxoSmithKline and AstraZeneca as well as wholesaler McKesson were involved in earlier settlements.

The settlement is expected to result in a reduction of the price of many pharmaceuticals, saving consumers and health insurers billions of dollars in prescription drug costs.