Plan sponsors should review pbm to implement cost control strategies and optimize services to beneficiaries. However, many PBM contracts contain a contractual language that severely limits the full review rights of plan sponsors. PbM also contains certain conditions that plan sponsors must set before conducting a PBM audit. With regard to the audits of producer rebates that PBM must pass on to plan sponsors, PBM hides secret relationships it has forged with discount aggregators. Frier Levitt reviewed PBM contracts that prohibit plan sponsors from conducting audits of drug manufacturers` rebates. It is imperative that plan sponsors have full trial fees for all PBM network pharmacy contracts, damage data, remittance and administrative costs contracts, postal purchase invoices, clinical coverage criteria and decision documents for forms. To preserve these rights, they must have a competent health advisor to negotiate sponsorship plan agreements. The contract with Pharmacy Benefit Managers (“PBMs”) is a daunting task that plan sponsors should not delegate and entrust to brokers or consultants. Some performance brokers place their personal interests above their clients and get, unknown, sponsors plan, significant financial incentives from PBMs. Plan sponsors have the ultimate responsibility to verify the terms of the PBM contract and to ensure that there are no vague contractual terms that plan sponsors would hamper PBM`s performance monitoring capability.

PBMs use bulk terms to create hidden revenue streams. Frier Levitt has identified several pitfalls in PBM contracts, some of which are listed below. Another important element of the sponsorship plan contract with PBMs is pricing differences. Most PMBs adopt a traditional pricing approach, known as spread pricing or differential pricing, which means that PBM negotiates to aggressively pay drug reimbursement rates to pharmacies on the network, and in return, charges PBM customers, the sponsors of the plan, at higher contractual rates. PBM benefits from the gap between what the plans pay pbm and what PBM in turn pays the pharmacy. To take control of the spread pricing system, plan sponsors must require PBMs to determine and use either the lowest price source for each drug or the price source, which represents on average the lowest average wholesale prices (“AWP”). PBMs use two sets of “Max Allowable Cost” (“MAC”) for generic drugs. A MAC price list is paid at the pharmacy and another MAC price list for the same generics is billed to the plan sponsor. The PBM benefits from the margin between these two price lists. Plan sponsors should ask PBMs to use a full MAC list and also require transparency in pricing.

The most important opportunity for the misuse of PBM in plan sponsors is probably related to manufacturers` reduction relationships. The key lies in the text of the treaty. A “complete pass” of rebates does not necessarily mean that all the revenue that PBMs receive from the manufacturer are passed on to plan sponsors.