Peeling Back the Layers of Your Pharmacy Benefit Design

It’s the time of year for a pharmacy benefit annual review to evaluate benefit design options, new programs, and trend management solutions for the 2025 benefit year. While it is best practice for plan sponsors to review their organization’s core benefit annually, it is also prudent to periodically review less obvious benefit setup options to ensure alignment with the plan sponsor’s intent. As pharmacy continues to rapidly evolve and make up a larger percentage of annual healthcare spend, consistent review of pharmacy benefit setup becomes increasingly important. Collectively, small tweaks can yield significant savings and minimize the risk of unintended trend creep. In the sections below we will highlight some of the areas a plan sponsor typically has optionality.

Core Benefit Design

Core benefit designs include member cost share, tiering options, and deductibles. The pharmacy benefit design is often reviewed alongside the member’s medical benefit design. Optimizing a plan sponsor’s core benefit design should always balance therapy access with cost, with the ultimate goal of optimizing clinical outcomes while keeping premiums at an affordable rate. Working with an experienced consultant, a plan sponsor and their pharmacy benefit manager (PBM) should evaluate several designs, while balancing member impact with affordability.

Formulary & Utilization Management Package Selections

Though frequent changes are not recommended, formulary and utilization management (UM) options should be periodically reviewed to ensure trends are being effectively managed and the appropriate level of access is being provided to members. UM packages create limiting factors for drug dispensing and aim to optimize patient outcomes while reducing waste, errors, unnecessary drug use, and overall total cost.

Network Evaluation

Pharmacy network evaluation includes the network allowance of where members can get their medications filled including retail locations, mail-order pharmacies, specialty pharmacies, and 90-day fill availability in each of these channels. Network rules can mandate or incentivize members to use the lowest-cost pharmacies, with the intent of saving costs for the plan sponsor and member. An important consideration is geographical access as there are “pharmacy deserts” where only one or a few pharmacies may exist within pockets of the United States. Thus, narrowing a network without careful consideration of these “pharmacy deserts” could unintentionally leave some members without access to medication.

Specialty Benefit Limits

Specialty drugs make up over 50% of drug spend, though they provide treatment for less than 2% of the population. Careful management of these drugs is extremely important due to their high cost and treatment of delicate disease states. A plan sponsor should be aware of the day supply limit of specialty drugs and understand the various options available to limit wastage. The most common day supply limit for specialty drugs is 30-days, though in some cases a plan sponsor may have a 90-day specialty fill limit. Other options include sophisticated programs optimizing day supply by limiting access to 15 days when certain poorly tolerated medications are newly started while extending to 90 days once a member has been stabilized on therapy.

Elective Class Coverage & Optional Exclusion Lists

Not all plan sponsors cover all drug categories or may have certain drug categories carved out for member access under other benefits. Classes such as fertility, weight loss, and sexual lifestyle drugs may be excluded from a plan sponsor’s pharmacy benefit. It is important for plan sponsors to understand where coverage exists for their members and ensure their pharmacy plan design is set up to support their intent. Additionally, some PBMs have optional exclusion lists for drugs with significant cost but provide low clinical value compared to alternatives. Generally, it is recommended to exclude all drugs on this list as it can help prevent excess drug spend and waste.

Evaluation of Existing & New Clinical and Financial Programs

Plan sponsors should work with their consultants to periodically review existing programs for continued value and evaluate new clinical and financial programs as they become available. Prospective evaluation can include return on investment (ROI) analysis, identification of any potential redundancy, synergy, or even gaps with current benefit, future reporting and metrics, and performance guarantee (PG) methodology that aligns with value.

Miscellaneous Benefit Options

Other miscellaneous benefit options may include coverage rules for medical devices under the pharmacy benefit, select over the counter (OTC) coverage, refill-too-soon (RTS) parameters, compound coverage and edits, standard and custom drug lists, and dispense as written (DAW) rules. These are areas of the benefit that are typically never revisited after a plan sponsor’s original implementation, but collectively they could be impactful.

Risk Strategies Consulting support

Due to consistent change and growth within pharmacy, Risk Strategies Consulting recommends periodic review of these benefit options to ensure they continue to be aligned with the plan sponsor’s intent. Tight management of the pharmacy benefit does not need to mean member dissatisfaction or perceived inferior benefit if it is thoughtfully designed and effectively managed.

The pharmacy benefit experts at Risk Strategies Consulting are here to help support our clients when reviewing their pharmacy benefits and making important decisions about their pharmacy coverage. Learn more about Risk Strategies Consulting and our Pharmacy Consulting services.