For fiduciaries of health care plans, having access to data and understanding the intricacies of pharmacy benefit manager contracts is necessary to conduct a prudent monitoring process.

Speakers at PLANSPONSOR’s Roadmap: Health Plan Fiduciary Duties livestream on “Data and Documents” on Thursday discussed how to negotiate PBMs and third-party administrators to access the health plan data plan sponsors need, as well as pitfalls to look out for in contracts with PBMs.

Negotiate, Monitor, Audit

Zach Fiedler, chief operating officer of the Prism Health Group, said plan sponsors’ fiduciary responsibilities for their health plan can be categorized in three areas: the contracting and pre-negotiations phase, ongoing monitoring and a performance audit.

During the contracting phase, Fiedler said plan sponsors are negotiating with the PBM to get the most optimal terms for the plan and their members. He says claims data must be accessible during the negotiation phase because it provides leverage to show the financial impact of agreement.

Ongoing monitoring of the health plan involves validating that the pricing and benefits outlined in the contract are operating appropriately, Fiedler explained.

“It’s important to identify issues through this monitoring phase before they become a major problem,” Fiedler said. “That helps manage plan spend and also mitigate member disruption.”

Fiedler said the performance audit is the final step to confirm plan sponsors are receiving what was promised by the PBM and that the plan is operating as defined by contractual guarantees. He said it is important to “trust but verify” and have an impartial validation from a third party to ensure the plan is performing as expected.

Leveraging Data

Alan Gilbert, a senior vice president of business strategy at 4C Digital Health, emphasized that for plan sponsors, “data is [their] superpower.”

“If you don’t have real-time access to your data, your fiduciary risk is hiding in plain sight, and you can’t really validate what you’re paying for in terms of accuracy, and you don’t get the real picture,” Gilbert said. “You don’t really understand what your population may need if you cannot dive into the details and understand it.”

In addition to accessing claims data, Gilbert says it is important for plan sponsors to see the billed amount, paid amount and any discounts to which they may be entitled.

Patrick Moore, co-CEO of Pretekt, a software company designed to help plan sponsors comply with the Consolidated Appropriations Act, said many employers with whom he works do not understand the contracts they are signing. However, he said having access to pricing data provides significant leverage to the plan sponsor and could help it benchmark the prices against competitors in the future.

“If you’re a small plan sponsor, the first time you get to see the prices you’re paying for things, that’s all you need,” Moore said. “Once you can actually dig into that [data] as a plan sponsor, that’s when you get the power to actually do something about it.”

Once plan sponsors are able to see what they are paying their PBM for prescription drugs, for example, Moore said they have leverage to potentially threaten to change their PBM if they are unsatisfied with the pricing.

Contract Language

Fiedler said he often sees plan sponsors that do not receive the best pricing on prescription drugs, and he says one way to get ahead of this is by writing into the PBM contract the right to conduct annual market checks on PBM pricing. This is another instance in which a third-party validation can help provide benchmarks against the market to ensure that the plan sponsor is receiving the best available price.

In addition, Fiedler said plan sponsors often run into issues understanding contractual language. For example, he said, two different PBM contracts can seemingly look the same and have similar pricing guarantees, but they can operate very differently based on what the contract terms are.

“A lot of this can stem from how terms are defined, how claims are bucketed and what is included or excluded from guarantees,” Fiedler said. “It’s a very complex piece … but by understanding this language and how the documentation correlates to the actual claims data, that’s where it becomes important to be able to determine the actual financial impact with these varying contract terms.”

Third-Party Review

Moore said although many plan sponsors may assume that their current adviser or broker is monitoring the details of their health plan and understands the contract with the PBM, it is likely the plan sponsor is not doing a detailed analysis of the plan. He emphasized the importance of plan sponsors working with an unbiased third party that can take a closer look at drug costs and contractual language.

Gilbert said some states have enacted laws that require reviews of PBM contracts for state employee plans, and the state cannot find an unbiased reviewer because of conflicts such as being paid by the PBM.

“It’s also really important to recognize that … employers have to be bold,” Gilbert said. “I’ve worked with benefits teams that are part of some of the largest companies in the world, and there’s less than 10 people doing all of this. … They’re stretched, and that’s why they need this outside, independent expertise.”

The full livestream can be viewed here. A recap of last week’s session, “A CAA Overview,” can also be found here. Registration for the next sessions in the series is available here.