Ambiguity in Certain PBM Contacts Can Be Very Expensive, and How to Avoid Them


medicineMany health and long-term care institutions in the U.S. enlist the service of pharmacy benefits managers (PBMs) to seek the most favorable drug prices in the market. PBM works by negotiating prices with drugstores and pharmaceutical companies, giving their clients access to quality medicines at a reduced cost.

Sadly, Crystal Clear RX notes that some clients could not get the most out of their PBM contracts due to ambiguous PBM languages. Among the terms most commonly being mischaracterized in PBM contracts are generic drugs and brand drugs.

How Drug Misclassification Affects Cost

Although discrepancies between the definitions of generic and brand drugs may seem very technical, it directly affects how clients pay their PBMs.

PBMs contractually offer lower discounts to drugs classified as brands, while generic drugs typically receive higher discounts. As such, if a PBM misclassified a generic drug as a brand drug, it will apply lower discount and charge its clients higher than the drug’s real price. This in turn could increase the client’s drug expenditures.

Generic or Brand? They Decide

Some PBM contracts choose to define generic drugs as medicines in which the supply is available from a sufficient number of FDA-approved drug manufacturers. The loophole here is the vagueness of “sufficient number.” It could be three, five, seven, depending on how your PBM wants to define it.

Some PBM contracts also vaguely define generic drugs as those determined by another “nationally available pharmacy drug information reporting service.” Here, the PBM is in great control of the indicators to use, and thereby could have an upper hand in manipulating drug characterization.

The key in ensuring that you will not fall into the trap of confusion and ambiguity is to enlist the service of a pharmaceutical consulting services firm that could help you write, negotiate, and analyze your contracts with PBMs.

With the guidance and expertise of a pharmacy benefits consultant, you can be sure that your contracts with your PBMs would contain airtight definitions that would enable you to access drugs in prices that are fair and favorable.