New medications, higher prices on existing drugs, costly specialty drugs, fewer patent expirations — the list of reasons for ever-increasing pharmacy costs is extensive. But the impact remains the same with higher costs for you, the employer, and fewer benefits for your employees.

To curb these costs, many employers rely on Pharmacy Benefit Managers (PBMs) to rein in the cost of medications. And they do. PBMs negotiate with drugmakers and pharmacies to secure more competitive pricing. However, with PBMs growing in size, and questions arising regarding their transparency and independence, it is essential that a thorough audit is conducted to ensure your organization is getting the most out of its PBM. This vital process begins with asking the right questions.

1. Is my PBM contract competitive with the market?

PBM pricing represents one of the easiest ways to curb drug costs with little to no disruption to members. Rampant consolidation within the PBM industry has provided ample room for employers to snap up rebates and negotiate better pricing. The key is negotiating from a position of strength, with a thorough understanding of the PBM market, the subtleties in contract provisions, and pricing benchmarks.

2. How long has it been since we issued a Request for Proposal (RFP)?

Best practices recommend issuing an RFP every three years, with annual market checks during the intervening years. It is always advantageous to test the market and evaluate opportunities to secure stronger pricing, either from your existing PBM or through a new relationship.

3. Have we performed a PBM audit?

A high claims volume makes PBMs vulnerable to costly errors including misapplied discounts, missing rebates, and duplicate billing. An audit provides an opportunity to correct those errors and recapture monies inappropriately paid out as either overpayments or through coding mistakes. It can also ensure that a plan has been set up correctly and that fiduciary responsibilities were fulfilled.

4. How often should we do this?

Best practices recommend conducting a claims audit every one or two years and a rebate audit every three years.

5. What is our specialty pharmacy strategy?

On average, 1% of an employee population will use specialty medications. But, these medications accounted for nearly 40% of U.S. drug spending in 2016. By 2020, specialty medications are anticipated to account for over half of U.S. drug spending. As a result, managing specialty pharmacy spending has never been more crucial. Significant cost control is possible through strategies like ‘carve-out’ and forward-looking clinical management programs that target unnecessary spending.

6. How has our medical plan vendor managed the specialty drugs under our medical plan?

At least 50% of specialty drug spending takes place under an employer’s medical plan, so proper management is essential. For example, the cost of drugs dispensed in a hospital outpatient setting is two to three times more expensive than the same drug dispensed in a physician’s office or as home infusion. Medical plan vendors can have a huge impact on pharmacy spending for better or worse.

From formularies to financial incentives, cost-sharing to clinical coverage rules, managing pharmacy costs is a complex enterprise that changes by the day. If you’re not asking these essential questions, it’s likely your pharmacy benefits program needs improvement.