The Hospice Clinician Blog

Pharmacy Benefit Manager: Abbreviated PBM. A company under contract with heath care sponsors such as managed care organizations, self-insured companies, and hospice programs to administer and manage pharmacy networks and contracts, provide drug utilization review, outcomes management, and disease management. A pharmacy benefit manager will fill drug prescriptions by a network of pharmacies and/or mail order pharmacy. The aim of Outcome Resources, as a PBM exclusively for hospices, is to save money through specialized focus on palliative symptom management and patient driven outcomes for hospice organizations.

PBM is a term which refers to any prescription drug program administrator. PBMs technically are private companies that contract with health care sponsors (such as hospices) and specialize in claims processing and administrative functions. With increased attention focused on prescription drug programs, expenditures, and coverage, interest also has increased in drug program cost control measures, in particular those of Pharmacy Benefit Managers (PBMs). (The University of Wisconsin School of Pharmacy report in 2000.) PBMs have had a central functional role in prescription drug coverage plans built around claims processing and program administration activities. A number of strategies and techniques to control costs in drug programs have been used by PBMs. Some of the strategies utilized by PBMs include the combination between a discounted Average Wholesale Price (AWP) rate, generic substitutions, formularies, Drug Utilization Reviews and symptom relief management.

The standard approach for pharmacy reimbursement for dispensed prescriptions is to pay an ingredient cost for the drug dispensed plus a dispensing fee. Ingredient cost payment for drugs is typically determined by deducting a percentage from the drug's average wholesale price (AWP). Though this is changing, AWP has been a common contractual rate. Due to a PBMs volume of claims and network relationships, contracts with a PBM generally provide a deeper discount than an organization can negotiate on their own. Hospices can benefit from the ease of one contract and one rate with access to multiple pharmacies. Working with a PBM can streamline administration by providing one consolidated invoice.

The goal of generic substitution is to increase the use of generic drugs and decrease costs. At the time of dispensing the pharmacist will be notified about the generic substitutions. Only if specified by the Doctor will a brand product be filled. In addition, Outcome Resources also provides consultation services with clinical pharmacists trained in end-of-life medication management, enabling hospice staff to consult regarding drug substitution, interactions, and the best medication based on individual patient circumstances.

Online real-time adjudication is another one of the benefits to a hospice of using a PBM, since many errors are caught at the time of dispensing thereby reducing the need to resubmit claims. Outcome Resources also offers detailed oversight of a clinical pharmacist team in analyzing each hospice's drug utilization, providing monthly reports and using the information to increase the quality of patient care, decrease costs, and customize formularies and education programs for the hospice.

A formulary is another way PBMs manage drug utilization. A list of covered or reimbursable drugs is approved based on the formulary. The underlying intent of a formulary is to improve prescribing and drug use quality. Formularies can be established by PBMs, hospices, or other health care sponsors. Formularies can be labeled in various ways to reflect the drugs included and ease access to drugs not on the formulary or not covered. An open formulary includes all drugs. Any drug transmitted will be approved and dispensed. A closed formulary includes only covered drugs such as those on a specific formulary. A closed formulary varies from including only one select drug within a therapeutic category to including multiple drugs within a therapeutic category. A preferred or partially closed (restricted) formulary specifies the drugs covered, but allows exceptions to the list. Each PBM handles the development and monitoring of formularies differently. For example, Outcome Resources allows hospices to custom-tailor their formulary as part of their individualized plan design. Some other PBMs insist on a strict formulary that must be adhered to.

Palliative management has evolved with some PBMs through the Disease Management model. This generally refers to the practice of identifying patients with specific conditions and providing intensive care and monitoring of drug utilization and effects. The goal is to minimize treatment costs and maximize patient care. Pharmacists may be paid separate professional service fees for their efforts in disease management or it may be included as part of your overall service contract with a PBM. The target of disease management programs is the consumer, through the efforts of pharmacists providing educational and therapeutic interventions for patients, caregivers, and prescribers.

Cost control strategies of PBMs do work and some successes have been supported empirically. Prescription expenditures and pharmacy costs have been the most rapidly growing component of health care expenditures in recent years and health care sponsors such as hospices are demanding the services of a PBM to help control these complex costs. Hospices are finding that a partnership with a Pharmacy Benefit Manager (PBM) can result in maximizing palliative symptom management and minimizing drug therapy costs. Also the competitive industries for PBMs provide a large spectrum of programs and services offered to hospices. If your hospice is considering a partnership with a Pharmacy Benefit Manager (PBM), please contact us for information and a free consultation.

Outcome Resources is a PBM that has partnered exclusively with hospices nationwide for a decade, and we would be honored to discuss the value of a partnership with your hospice organization.

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