Hospitals and health systems may be tempted to take on the role of pharmacy benefit manager (PBM) and insurer when it comes to employee prescription drug benefits. The drivers toward this decision are pressures from increased PBM administration costs, a rise in utilization of pharmacy benefits among employees and their dependents, escalating drug prices as well as a desire to include new drugs in the formulary, particularly regarding growth in demand in the specialty drug sector.

However, in-sourcing the services of a PBM and insurer is not just a matter of filling more prescriptions from the hospital outpatient pharmacy. This decision requires coordination between your organization’s Human Resources Employee Benefits function, your hospital’s P&T and Oversight Committees, in addition to Pharmacy and Finance operations to manage the actual administration of the benefit.

HR Benefits Oversight – an expanded role with new knowledge and skills

In the battle between costs verses prescription drug services, it is usually the manager of the employee benefit plan that bears the burden for knowing and defending how the benefit dollars are expended. This is the person who must search out the evidence that the program is providing the highest quality of services while curtailing extraneous costs – or not.

While still at IU Health as Chief Pharmacy Officer, Visante CEO Jim Jorgenson worked closely with the institution’s HR Benefits team to in-source formerly contracted PBM functions and provide services through their existing outpatient pharmacies. Jim states that the results were stunning: “By in-sourcing Rx benefits, IU Health reduced benefit costs by more than $5 PMPM and added $2 million in margin to our in-house retail pharmacies via increased prescription capture.”

At the University of Michigan, Visante Senior Consultant Keith Bruhnsen dedicated the last 12 years to developing and managing its employee prescription drug benefit plan. This award winning program is self-insured and provides self-administered outpatient employee prescription drug benefits for over 101,000 lives. He oversees a $100M program budget and has demonstrated accrued savings in excess of $50M. Keith would be the first to admit that this did not happen overnight. He worked alongside institutional leadership in several departments to develop a conservative business plan; along the way, they have all learned lessons about effective vendor contracting, benefit design, claims adjudication and all that goes along with running a self-funded insurance program.

To help others evaluate their current PBM as well as research the possibility of taking on the responsibility for these services, Keith has conducted workshops and provided consultation to employers, health plans and others seeking to understand the business of pharmacy benefit management. His belief is that knowledge is power and prescription drug benefit managers must be able to accurately assess what they are getting from their PBMs and what they are giving up for these services. He has also been helpful as employer groups consider what functions could be brought in-house for greater savings and adding new revenue to their healthcare organizations.

The savings are clearly there if your organization can provide the expertise to create the necessary functions and services provided by your PBM. The return on investment may also be lucrative when in-sourcing employee pharmacy benefits. But how you proceed in your data evaluation, program development and ultimately the actual conversion to a self-administered program could present unforeseen challenges.

You can find more detailed information about evaluating your PBM in a compelling article, written by Visante’s Jim Stevenson and Keith Bruhnsen. Titled, “Strategies to Improve PBM Management of an Employee Prescription Drug Plan” it is slated to appear in the March-April issue of the American Journal of Pharmacy Benefits/ American Journal of Managed Care (AJPB/AJMC).