The healthcare sector often grapples with understanding the complexities of managing pharmacy benefits, a task overseen by two types of entities: the long-standing Pharmacy Benefit Managers (PBMs) and the relative newcomers, Pharmacy Benefits Optimizers (PBOs). Understanding the nuances of their roles and how they adapt to evolving healthcare demands is crucial for organizations navigating this sector.
What is the difference between a PBM and a PBO, and how can an organization choose the right option for its needs?
PBMs: A Wider Focus – Operational to Plan Member Support
PBMs perform the widest range of services when it comes to pharmacy benefits. At their core, PBMs focus on prescription drug provision’s logistical and operational aspects, such as claims processing and maintaining pharmacy networks. This traditional role is essential for the smooth execution of pharmacy benefits, ensuring patients can access required medications through a streamlined system.
They also build, implement, and manage comprehensive formulary and drug benefit plans on behalf of clients, negotiate with pharmacies, and handle contracts with pharmaceutical manufacturers. Over the last two decades, PBMs have continued to expand their clinical and care management offerings to help improve health outcomes and lower long-term costs.
PBOs: A Strategic Approach to Benefit Optimization
The focus of a pharmacy benefits optimizer is a bit narrower: enhancing the value and effectiveness of pharmacy benefits by emphasizing cost-effectiveness and operational efficiency. The core functions of a pharmacy benefits optimizer revolve around optimizing benefit management and lowering costs. These functions include:
- Strategic Drug Formulary Management: PBOs are responsible for selecting the best possible drug therapies for patients while managing healthcare costs.
- Independent and Unbiased Decision-Making: PBOs operate independently from pharmaceutical companies, allowing them to make decisions that prioritize patient and healthcare provider interests.
- Cost-Effectiveness Analysis: PBOs use data-driven methods to evaluate drug spending patterns and usage, identifying opportunities to reduce costs without compromising the quality of care.
- Negotiation of Drug Prices and Contracts: PBOs focus on minimizing costs and optimizing overall value through strategic negotiations backed by market analysis and data insights.
Collaboration between PBOs and PBMs
Although PBMs have historically been the go-to, they may also collaborate with a PBO to enhance the efficacy and efficiencies of pharmacy benefits management. Their combined efforts are particularly evident in the development of drug formularies and in aligning strategies for cost containment.
1. Development of Drug Formularies
Developing drug formularies is a critical area where PBOs and PBMs work together. PBOs can leverage their strategic expertise to analyze and select the most effective and cost-efficient drugs. They consider clinical success rate, safety, and overall value to patients. This strategic input is crucial in creating a formulary that balances quality and cost.
PBMs then implement carefully curated drug formularies within the healthcare system. They manage the logistics of making these drugs available to patients, handle the complexities of distribution, and ensure that the formularies are adhered to in various healthcare settings.
2. Aligning Strategies for Cost Containment
When it comes to cost containment, PBOs and PBMs coordinate their efforts to negotiate drug prices and optimize pharmacy networks. For example, PBOs can provide the analytical backbone, using data-driven insights to identify cost management opportunities that don’t compromise the quality of care.
PBMs utilize these insights to negotiate better pricing with drug manufacturers and to streamline pharmacy network operations. Their role involves implementing the strategies developed by PBOs and ensuring the application of negotiated terms in the real world.
Choosing the Right Option
Selecting between a PBO and a PBM hinges on an organization’s needs and goals. Here are some criteria to consider before making a choice:
- Evaluate Short- and Long-Term Goals: Is the priority reducing immediate costs or achieving long-term value and cost-effectiveness? PBMs provide straightforward cost reductions through negotiations and improved operational efficiencies, while PBOs offer comprehensive cost-saving strategies through their analytical capabilities. If an organization values stability and consistency in pharmacy benefits, a PBM’s traditional approach might be appropriate. For organizations that prioritize innovation and adaptability, a PBO’s approach might be more aligned with these goals.
- Perform a Cost-Benefit Analysis: Conduct a thorough cost-benefit analysis to understand the financial implications of choosing either a PBM or a PBO. Immediate costs as well as long-term financial impact must be considered.
- Review Integration with Existing Systems: How well does a PBM or PBO integrate with existing healthcare and benefits systems? Seamless integration can be a crucial factor in ensuring efficient operations and minimizing disruption.
- Consult All Stakeholders: Organizations must engage with key stakeholders, including healthcare providers, insurance providers, and beneficiaries, to make a decision that aligns with the interests of all parties.
Choosing between a PBO and a PBM depends on how each option aligns with an organization’s objectives and the needs of beneficiaries.
Xevant Has the Right Analytics Tools to Support PBMs and PBOs
Xevant remains at the forefront of driving transparency in pharmacy benefit management practices – from PBMs to PBOs. Our platform provides pharmacy stakeholders with real-time, transparent data from the entire pharmacy benefits ecosystem, enabling users to compare prices, explore alternatives, and optimize their pharmacy benefit offerings in less time.
For more information on how Xevant can help streamline pharmacy benefits management, please schedule a demo with us today.