Pass-Through PBM Contracts Provide Full Transparency

October 4, 2022

Tracy Johnson discusses why traditional PBM contracts are not transparent at all and what you should look for in your next renewal.

Pass-Through PBM Contracts Provide Full Transparency

Self-Insured and Captive Plans: Are Your PBM Contracts Transparent?

If your pharmacy benefit manager (PBM) contract is a traditional one, you might want to consider re-negotiating it when it comes up for renewal.

Traditional PBM contracts are not transparent at all. They use spread pricing: The PBM charges the plan sponsor a contracted price and pays the pharmacy a different price, which allows the PBM to keep the difference, otherwise known as the spread. No one outside the PBM knows what that difference is – or how much you should really be paying.

A pass-through contract works the opposite way. It’s fully transparent. The pharmacy pays the same price you are billed, and the PBM makes its money from a fully disclosed administrative fee. So, everyone knows what everyone else is making.

The same opaque process applies to rebates. In a traditional PBM contract, the PBM also keeps a portion of the rebates, and you don’t know the amount. In a pass-through, the rebates go directly to you as the plan sponsor.

More advantages for PBM pass-through contracts

  • With a pass-through PBM contract, you may have alternative funding options available through international pharmacies and manufacturer assistance programs, which can save you and your covered participants even more money.
  • Auditing for a pass-through contract is easier and less costly.
  • With a pass-through PBM contract, you can opt for a lowest-net-cost formulary. In a traditional contract, the PBM is incentivized to use drugs based on higher rebates.
  • If you switch to a pass-through PBM contract, you will see a new administrative fee. It looks like an extra charge you didn’t pay before, but it was buried in the traditional contract cost all along.

Needless to say, The Miller Group believes in the advantages of a pass-through PBM contract. Plus, with the new CAA reporting requirements and the No Surprises Act, a pass-through contract puts you in a better place to be compliant. It’s just the right thing to do.

About The Author

Tracy Johnson

Tracy Johnson
Email As Director of Pharmacy Benefits, Tracy has more than 20 years of experience with customized pharmacy benefit solutions. Tracy works with clients to help drive down pharmacy benefit expenses embedded in employer’s healthcare costs. She provides easy-to-understand reporting, shares regular updates on pharmacy benefit trends and industry insights, manages carrier relationships and serves as a subject matter expert for clients and account team associates.

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