Why Our Coalition Contract Terms Are Stronger Than Any Other PBM Contract Terms In The Nation
After drafting an extremely detailed contract of more than 150 pages to ensure that every Coalition Member will be fully protected and will obtain the lowest possible prescription coverage costs, the Coalition’s founders invited more than 25 PBMs to participate in a Coalition-run RFP.
The Coalition required each PBM Contestant to (i) review the Coalition’s proposed contract, and (ii) provide the PBM Contestant’s best proposed pricing terms and guarantees. Thereafter, the Coalition’s leaders conducted several months of negotiations with PBM contestants to hammer out the best possible substantive and financial contract terms.
We urge every Health Plan to compare the strengths of the Coalition’s final contract terms with the terms contained in your existing contract (or the contract of any Coalition that your Health Plan may have joined).
Here are the differences you’ll likely discover:
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The Coalition’s Contract Terms |
Likely Terms In Your Contract |
| Pass-Through Pricing | Our contract requires pass-through pricing for every drug dispensed | Virtually all contracts contain pass-through pricing, but only for retail drugs, thus allowing the PBM to generate and retain unknown and unknowable “profit spreads” on all mail and specialty drugs |
| Airtight Contract Definitions | Our contract contains more than 75 airtight contract definitions – including for critical terms like “Brand Drug,” “Generic Drug” and “Specialty Drug” – and thus precludes the PBM from shifting drugs from one category to another and thereby eviscerating contract pricing terms and guarantees | Virtually all contracts contain amorphous contract definitions and thus allow PBMs to mischaracterize and shift drugs from one category to another, meaning PBMs regularly and continuously evade and eviscerate contract pricing terms and guarantees |
| Generic Pricing | Our contract entirely eliminates all MAC (Maximum Allowable Cost) provisions | Virtually all contracts allow PBMs (i) to create any generic prices they want and call them MACs (“Maximum Allowable Costs”), and (ii) change their MAC pricing whenever the PBMs want, making it impossible for Health Plans to control generic costs, and ensuring that the PBMs can overcharge for generic drugs whenever the PBMs want |
| Price Controls & Guarantees | Our contract contains a price “control” and/or guarantee over every drug dispensed | Virtually all contracts provide guarantees over certain broad drug categories, but entirely ignore numerous drugs (like compounds, new-to-market drugs, specialty drugs dispensed from the retail pharmacy, etc.), and thus enable PBMs to overcharge for all “uncontrolled” drugs |
| Specialty Drugs | Our contract contains a “Minimum Discount Guarantee” for every Specialty Drug (meaning for 850+ drugs) | Count how many Specialty Drugs your contract references, and you’ll realize your contract contains price controls for only a limited number of Specialty Drugs (meaning your PBM can charge whatever it wants for every unidentified Specialty Drug) |
| New-to-Market Specialty Drugs | Our contract contains a “Default Discount Guarantee” for every new-to-market Specialty Drug that enters the market | Most contracts don’t even address the issue of new-to-market Specialty Drugs, meaning PBMs can charge whatever they want for every new, high-cost Specialty Drug that enters the market |
| Commonly Used Generic Drug Guarantees | Our contract contains “Maximum Price Guarantees” for drugs that are typically the focus of clients’ Savings Programs | Most contracts don’t create any pricing controls for Commonly Used Drugs, meaning when Health Plans create Savings Programs, the Plans typically lose out on a large portion of the potential savings from their Savings Programs |
| Newly Available Generic Drug Guarantees | Our contract gives our Coalition experts the right to monitor the prices of all Newly Available Generic Drugs, and negotiate “Maximum Price Guarantees” if the PBM fails to update pricing appropriately for these drugs as their prices plummet | Almost no contracts even address the issue of prices for Newly Available Generic Drugs, meaning months or even years after these Drugs enter the market, Health Plans are not benefitting from available low costs |
| Rebates | Our contract requires the PBM to pass-through 100% of all “Financial Benefits” (not just rebates) from all third parties (not just drug manufacturers) | Virtually all contracts only require that some percentage of “rebates” from “drug manufacturers” be passed through (enabling PBMs to retain all manufacturer – or other third party – monies that PBMs label with a name other than “rebates”) |
| Audit Terms | Our contract contains several pages of audit terms (i) specifying in detail all documents and data that the PBM must produce for our annual audits; and (ii) setting forth precise formulas for verifying satisfaction of every contract pricing term and guarantee | Virtually all contracts (i) are silent, or say little, about the documents and data that PBMs must produce; (ii) contain no details setting forth how guarantees will be measured; and (iii) contain language making clear that core information is “proprietary” (and thus won’t be accessible to your auditor) |
| Auditor Autonomy | Our contract makes clear that (i) our Coalition will have an unfettered right to select its own auditor; and (ii) all audits will be conducted pursuant to a Confidentiality Agreement we have already drafted that will ensure the Coalition has access to all necessary information | Virtually all contracts (i) allow PBMs to “mutually approve” auditors (meaning PBMs can veto the best of auditors); and (ii) allow PBMs to impose on their “accepted” auditors the PBMs’ own Confidentiality Agreements (and virtually all PBM Confidentiality Agreements typically limit what auditors can audit, and what they can disclose to their own clients, meaning you!) |
| Quarterly & Annual “Rights to Renegotiate” Pricing Terms and Guarantees | Our contract allows our Coalition to re-negotiate on behalf of every Coalition Member – on a quarterly and annual basis – specified pricing terms and guarantees, to ensure that all such terms remain competitive for the life of your contract | Almost all contracts lock Health Plans into pricing terms and guarantees for the life of the contract (typically 3+ years), meaning the contract’s terms become obsolete and non-competitive long before the contract expires |
| Termination Rights | Our contract allows every Coalition Member to “terminate its contract with or without cause on 90 days notice” (meaning your PBM will be incentivized to provide competitive pricing terms when we exercise our contractual “rights to renegotiate”) | Virtually all contracts lock clients into 3+ year contract terms, unless there is a “material breach” (which is always a matter of dispute) |
| Automatically Decreasing Administrative Fees | Our contract is structured to decrease each Coalition Member’s Administrative Fees automatically as the Coalition grows in size | Most Health Plan – and Coalition – contracts lock Health Plans into stated Administrative Fees for the life of the contract |
Review your existing contract – or a new contract that a PBM or consulting firm is proposing – and you’ll likely discover all of the above-listed contract weaknesses. Or call us, and we’ll help you do so for free.
By eliminating all such contract loopholes, and executing an airtight contract with a new PBM, you’ll immediately generate cost savings. And you’ll also put yourself in a position to control your costs from now on.
But Wait – There’s More…
Read About Ongoing Coalition Member Benefits You’ll Obtain From Joining Our Coalition.
