Negotiating a pharmacy benefit manager (PBM) contract is a pivotal step for self-insured employers looking to reduce costs, improve transparency, and deliver better outcomes for their employees. However, success in these negotiations requires strategy, preparation, and collaboration across the organization. Below are six key steps on how self-insured employers can optimize PBM contract negotiations to ensure optimal results.

1. Start Negotiating One Year in Advance

Effective PBM contract negotiations require ample time for due diligence, analysis, and back-and-forth discussions. Initiating negotiations at least a year before your existing contract’s renewal allows room to:

• Review and assess the current PBM’s performance.
• Compare options with other providers.
• Address potential roadblocks without the pressure of looming deadlines.

Starting early also signals to PBMs that you are serious about understanding and refining your pharmacy benefit offerings. It shifts the balance of power by giving you time to walk away if terms don’t align with your goals.

2. Support Contract Proposals and Requests with Data

PBMs thrive on complexity, and data can be your most powerful tool to level the playing field. Leverage claims data, cost trend analyses, and utilization reports to justify your requests during negotiations. For example:

• Use data to highlight inefficiencies or hidden fees in your current arrangement.
• Model the financial impact of potential contract changes.
• Benchmark performance metrics against industry standards.

Solid data transforms your arguments from subjective preferences into objective requirements, increasing the likelihood of favorable terms.

3. Make It About More Than Just Price

Focusing too much on price (i.e., discounts, rebates, NADAC etc.) leaves value on the table. Instead, negotiate for terms that provide holistic cost management and improve employee outcomes. Consider provisions such as:

• Radically transparent pricing models that eliminate spread pricing or rebate gaming.
• Clinical programs that promote adherence, optimize therapy, and reduce waste.
• Non-exclusivity rights, such as specialty or mail pharmacy, to ensure control and flexibility.

A price-centric approach might save money in the short term but fail to address long-term value or alignment with your goals as a self-insured employer.

4. Partner with Experts

PBM negotiations are highly technical, and partnering with certified experts can give you an edge. Certified Pharmacy Benefits Specialists (CPBS) bring a deep understanding of the PBM industry’s profit models, contract structures, and cost-containment opportunities. Their expertise ensures you avoid pitfalls like hidden fees, misaligned incentives, and vague terms.

Benefits of working with CPBS professionals include:

• Enhanced Negotiation Strategies: CPBS-certified consultants identify and prioritize areas where you can achieve significant cost savings without sacrificing patient outcomes.
• Comprehensive Market Insights: They bring a detailed understanding of industry benchmarks and emerging trends, ensuring you’re equipped with the most up-to-date strategies.
• Comprehensive Audit Support: Experts ensure your PBM adheres to the agreed-upon contract terms, reducing waste and uncovering potential savings.

There is often a disconnect between what self-insured employers assume their consultants understand about pharmacy benefits and the consultants’ actual level of expertise. A CPBS-certified consultant closes the gap by acting as your advocate, providing the knowledge and confidence to negotiate contracts that truly align with your goals.

5. Understand Your Leverage

Your ability to secure favorable terms depends on understanding your leverage. Factors such as employee population size, claims volume, and the competitiveness of your local PBM market play a significant role. Key ways to enhance leverage include:

• Highlighting your readiness to switch to a more favorable PBM.
• Demonstrating your knowledge of the PBM’s cost drivers and profit models.
• Partnering with a fiduciary-model PBM that prioritizes your interests.

When you understand where you hold power, you can negotiate from a position of strength rather than dependency.

6. Ensure Strategic Alignment Among Executive Leaders

PBM negotiations shouldn’t be conducted in silos. Cross-functional alignment among finance, HR, and executive leadership ensures consistency in goals and priorities. Develop a unified strategy that clearly outlines:

• The organization’s priorities (e.g., cost savings, improved outcomes, or transparency).
• Non-negotiable contract terms.
• How pharmacy benefit changes align with broader benefits strategies.

When leadership is aligned, negotiations are more focused and decisive, reducing the likelihood of costly delays or internal disagreements.

Final Thoughts

Optimizing PBM contract negotiations is about more than securing the lowest price; it’s about creating a partnership that drives better outcomes for both your organization and its employees. By starting early, leveraging data, focusing on long-term value, and ensuring alignment across stakeholders, self-insured employers can significantly improve their position and secure terms that align with their objectives.

To learn more about how to approach PBM contract negotiations with a fiduciary mindset, visit TransparentRx.