Pharmacy Benefit Manager Cost Calculator

Pharmacy Benefit Manager Cost Calculator

Stop fumbling with numbers and approximations when it comes to Pharmacy Benefit Manager (PBM) costs. Many get it wrong. They overlook hidden fees, fail to account for rebates, or miscalculate the actual drug utilization rates. This is not just math; it’s money on the line. Understanding the true cost of PBMs is crucial for any healthcare provider or insurer. If you don’t have the right figures, don’t expect to make informed decisions or negotiate effectively—period.

How to Use This Calculator

Forget about the obvious. You need to gather specific data first. Start by collecting your historical drug spend data. This includes total costs paid to PBMs over the last year. Don’t just settle for the big numbers; break it down by drug class and utilization. You’ll also want to have information on any rebates received, as these can significantly alter your net costs. Next, get details on administration fees charged by your PBM. These often go unnoticed but are crucial for an accurate picture. You might also want to analyze patient adherence rates, which can affect overall costs. There’s no room for guesswork here.

The REAL Problem

Calculating PBM costs manually can be a nightmare. Most people get tangled in a web of complex contracts and varying fee structures that PBMs love to hide behind. The average person might think they can just plug in a few numbers and walk away with a solid answer. Wrong. You need to sift through numerous contracts, understand different pricing models, and know the specifics of drug tiers to get it right. If you’re not careful, you could end up paying far more than necessary.

Variables Explained

Let’s break down the key inputs you need for this calculation:

• Total Drug Spend: This is the total amount you spent on prescription drugs through your PBM during the specified period. It should include all co-pays and out-of-pocket expenses.
• Rebates Received: If your PBM offers rebates, you need to factor these in. They come in various forms and can significantly decrease your overall costs.
• Administrative Fees: These are the fees charged by the PBM for managing your drug plan. They can be a flat fee or a percentage of total spend.
• Utilization Rate: Understand how many prescriptions are filled and the average cost per fill. This can give you insights into patient behavior and adherence, which directly impacts costs.

Case Study

For example, a client in Texas came to us after realizing their PBM costs were skyrocketing. They initially thought they were spending around $1 million annually. After a deep dive using this calculator, we discovered their total drug spend was indeed $1 million, but they had overlooked a staggering $150,000 in administrative fees and an additional $50,000 in rebates. Once we adjusted for these factors, their real costs were $900,000, which gave them leverage in negotiations for their next contract.

The Math

The formula is straightforward if you have the right figures. You essentially want to take your total drug spend, subtract the rebates, and add the administrative fees. The basic math looks like this:

Total Drug Spend - Rebates + Administrative Fees = Total PBM Cost.

If you’re still confused, it’s time to rethink your strategy. Numbers don’t lie; people do, especially when it comes to finances.

💡 Industry Pro Tip

Here’s a little known fact: Many PBMs offer volume-based discounts that you might not be aware of. If your utilization rates are high, don’t hesitate to ask about tiered pricing. They may not offer this up front, but it can lead to significant savings.

FAQ

• What if my PBM fees change mid-year? Adjust your calculations to account for the new fees in real time. Don’t wait until the end of the year to figure it out.
• How often should I review my PBM costs? At least quarterly. The healthcare landscape is always shifting, and so should your strategy.
• What if I can’t get accurate data from my PBM? That’s a red flag. If they can’t provide you with clear data, it might be time to consider switching providers.
• Are there any hidden costs I should be aware of? Absolutely. Look for specialty drug fees, formulary management costs, and any other administrative fees that might pop up throughout the year.