PBM Admin Fees: There’s no such things as a free lunch

Learning the difference between traditional and pass-through PBM admin fees is one way to see your true pharmacy costs.

$0 or Low Admin Fees May Cost More

Although a $0 or low admin fee may seem like the right choice for your drug benefit plan, is it? In the long run, you may spend more. Understanding PBM contracts doesn’t have to be daunting. Always keep in mind that all PBM programs and services have fees associated with them whether they are included as part of the admin fee or not¹. The question is, how do you ensure that you are getting the best performance from your Rx benefit? This blog will help you determine what to look for so that you can gain insight into understanding your true pharmacy spend.

Get in the Know About PBM Business Models

In addition to a drug benefit plan that incorporates strategies to support cost management efforts, you also want programs and services to help improve health outcomes for your plan members. Plan sponsors have a choice between a traditional or pass-through PBM.

Traditional – This business model offers volume discounts and high rebates to achieve cost savings, but may keep some as revenue for the PBM. And, it may require strict adherence to plan design and contract details. A $0 or low admin fee contract is an “Rx Benefit Cafeteria” plan. You may pay `a la carte for each program or service and perhaps pay even more to add on programs or customize your drug benefit plan.

Pass-Through – A pass-through business model also focuses on discounts and rebates, but passes through what the PBM receives to the plan sponsor. You also benefit from more flexibility for any edits or changes with your plan design. And most programs and services needed to manage your benefit plan are already included in the admin fee. The benefit, you get the true picture of your pharmacy spend upfront, with no surprises.

Did you know that some traditional PBMs may charge additional dollars to customize your formulary? With a true pass-through PBM, customizing your formulary offers more flexibility because the PBM is not earning revenue from the drugs on the list, so there’s no conflict of interest. What other services could drive up your costs? Here are a few items to keep an eye on:

Managed Cost Exceeds Max Edit
Custom edits (or changes) to your benefit plan

Combined Benefit Management
Uncovered benefits that may not be included/defined as a line item

Utilization Management (UM)
Limited UM packages. Look for definitions that limit categories by chronic disease states and/or a broad specialty offering. Examples: Advanced opioid management program or an advanced utilization management program for specialty drugs.

Formulary and UM Changes
Mid-contract changes or changes that may include adding or removing products in response to high-cost drugs entering the market.

Basic, Advanced or Custom Reporting
Advanced or custom reporting that may cost more to add on.

Enhanced Fraud, Waste and Abuse
Annual fees and fees for additional reporting capabilities

Customized Member Communications
The cost for non-standard member communications

Vaccine Program Fee
Costs based on a ‘per vaccine’ claims amount.

A pass-through, admin fee only PBM (inclusive/comprehensive plan) could save you an estimated 20-30 percent on plan administration costs, based on the programs and services needed to manager your benefit plan.² That’s more money you can use to lower your Rx plan cost.

Be Informed and Make the Best Choice for Your Rx Plan

Ultimately, the choice is up to you as a plan sponsor to select the best business model for your prescription benefit plan. Always examine each plan option to determine similarities and differences in the services and programs included in the plan. Also review contract pricing and add back in all a la carte (cafeteria) plan items to find out what your all-in net cost will be. And remember, there’s no such thing as a free lunch. Download our infographic, which highlights services that could add costs to your plan.

Learn more in our infographic on cafeteria plans here.

¹ Key Insights Into How to Better Evaluate and Select a PBM. Navitus Health Solutions. https://go.navitus.com/key-insights-into-evaluating-pbms-lp. Published January 2020. Accessed July 26, 2021.

² Navitus internal data analysis of estimated add-on fees for programs and services needed to maintain your Rx benefit plan.