PBM Employer Guide
Pharmacy benefits are the fastest-growing cost in most employer health plans — and the most opaque. This guide walks you through every step of taking control: from baseline audit through contract negotiation, specialty pharmacy management, and ongoing performance oversight.
Employers who complete a competitive PBM RFP and negotiate transparent contract terms typically reduce pharmacy costs by 15–30% PEPY. (PBMI 2024 · EBIQ consulting estimate)
Baseline audit
Before you can fix your PBM situation, you need to understand it. Pull 12–24 months of pharmacy claims data and benchmark your current PBM performance. Key metrics: ingredient cost per claim, dispensing fees, rebates received vs. retained, specialty drug spend as a percentage of total pharmacy, and generic dispensing rate (GDR).
Identify hidden costs
Most employers are losing money to PBM practices they cannot see. Spread pricing — where the PBM charges you more than it pays the pharmacy — is the most common. But rebate retention, specialty pharmacy steering to PBM-owned pharmacies, and MAC list manipulation are equally costly. A proper audit surfaces all of these.
Most PBM contracts allow the PBM to retain a portion of manufacturer rebates. If your contract says "rebates will be passed through" without specifying 100%, you may be receiving less than you think.
PBM RFP
A competitive RFP is the single most effective way to reduce pharmacy costs. Include both traditional PBMs and transparent, pass-through models in your RFP. Evaluate on net cost — total pharmacy spend minus rebates — not gross cost or rebate guarantees in isolation. Rebate guarantees are meaningless if the PBM inflates ingredient costs to fund them.
Contract negotiation
The PBM contract is where employers win or lose. Most standard PBM contracts are written to protect the PBM, not the employer. Key terms to negotiate: 100% rebate pass-through, audit rights with independent auditor access, MAC transparency and appeal rights, specialty carve-out rights, termination for cause provisions, and data ownership.
Specialty pharmacy strategy
Specialty drugs represent 1–2% of prescriptions but 50%+ of pharmacy spend for many employers. Managing specialty pharmacy requires a multi-pronged strategy: prior authorization, step therapy, site-of-care optimization (infusions at home vs. hospital), copay accumulator management, and specialty carve-out to independent specialty pharmacies.
Copay accumulator programs are subject to state law restrictions in some states. Verify your state's rules before implementing.
Formulary management
Your formulary is your most powerful cost-control lever in pharmacy. A well-designed formulary drives generic utilization, controls specialty access, and aligns drug coverage with clinical evidence. Review your formulary annually and benchmark it against PBMI standards.
Ongoing performance management
PBM management is not a one-time event. Review pharmacy claims data quarterly, audit rebate statements against contract guarantees, and benchmark your performance against PBMI data annually. Most PBM contracts allow for annual renegotiation of pricing guarantees — use this leverage.