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Case Study – Certified Pharmacy Benefits Pharmacist (CPBP)
CPBP Interactive Case Studies
Certified Pharmacy Benefits Pharmacist (CPBP)
The Scenario: Analyzing a PBM Renewal Contract
A self-funded employer group, "Global Manufacturing Inc.," has received a renewal proposal from their incumbent Pharmacy Benefit Manager (PBM). The employer has noticed that while their generic dispensing rate is high (90%), their total drug spend continues to rise faster than expected. As the CPBP consultant, you must conduct a deep dive into the proposed contract language to identify unfavorable terms and hidden PBM revenue streams, then provide concrete recommendations for negotiation.
Proposed Contract Language (Excerpts)
Pricing & Definitions
- Brand Drug Pricing: Discount of AWP - 17%
- Generic Drug Pricing: Discount of AWP - 82%
- Specialty Drug Pricing: Discount of AWP - 15%
- MAC (Maximum Allowable Cost): "MAC price for generic drugs shall be determined by the PBM's proprietary methodology and is not subject to audit."
Rebates & Fees
- Rebates: "Client shall receive 100% of all formulary rebates collected from pharmaceutical manufacturers on behalf of the Client."
- Dispensing Fees: Billed to Client at a flat rate of $1.95 per prescription.
- Administrative Fee: $2.50 per member per month.
Your Task
1. The MAC definition is a major red flag. What is the primary financial risk this term creates for the employer?
Answer:
The primary risk is a hidden revenue stream for the PBM called "spread pricing" on generic drugs. The language "proprietary methodology" and "not subject to audit" means the PBM has total control over the price they bill the employer. The PBM can pay the pharmacy a very low, competitive MAC price (e.g., $5) for a generic drug but bill the employer a much higher price based on the AWP formula (e.g., AWP-82% = $40). The PBM then keeps the $35 difference, or "spread." This is the most likely reason the employer's generic costs are rising despite high utilization.
2. The rebate language promises "100% of all formulary rebates." Why is this language potentially misleading, and what is one specific type of manufacturer revenue the PBM is likely retaining?
Answer:
This language is misleading because the term "formulary rebates" is extremely narrow. PBMs collect numerous other payments from manufacturers that they do not classify as "formulary rebates," allowing them to pass through 100% of a small pool of money while retaining other, larger pools.
Example of Retained Revenue:
A specific type of retained revenue is the manufacturer administrative fee. PBMs charge manufacturers fees for the service of administering their rebate programs. These fees, which can be substantial, are often not shared with clients because they are defined as "service fees" rather than "rebates" in the contract.
3. Propose two specific changes to the contract language during negotiation to increase transparency and protect the employer from these hidden costs.
Answer:
- Demand a "Pass-Through" Pricing Model: Propose new language stating, "Client will be billed the actual amount reimbursed to the pharmacy for the ingredient cost and dispensing fee, plus a flat administrative fee per claim." This completely eliminates spread pricing, as the employer's cost is directly tied to the pharmacy's payment.
- Broaden the Definition of Rebates: Propose new language stating, "Client shall receive 100% of all monies received from pharmaceutical manufacturers in connection with Client's utilization, including but not limited to formulary rebates, market share rebates, administrative fees, data fees, and inflation protection payments." This closes the loopholes in the original definition.
The Scenario: Auditing PBM Claims Against a Contract
After a successful negotiation, Global Manufacturing Inc. has a new, fully transparent "pass-through" contract with their PBM. Six months into the new contract, they have engaged you to perform a claims audit to ensure the PBM is adjudicating claims correctly according to the new terms. You have been provided with a sample claims file and the key contract terms to identify any discrepancies or overcharges.
Contract Terms and Claims Data
Key Contract Terms
- Pricing Model: 100% Pass-through of the amount paid to the pharmacy.
- Client Cost Formula: (Ingredient Cost Paid to Pharmacy + Dispensing Fee Paid to Pharmacy) - Member Copay
- Admin Fee: The PBM will separately invoice a flat $4.00 per claim administrative fee.
- Member Copays: Generic: $15, Preferred Brand: $50, Non-Preferred Brand: $100.
Claims Data Snippet
| Drug Name | Formulary Tier | Ingredient Cost Paid | Dispensing Fee Paid | Member Copay Paid | Net Amount Billed to Client |
|---|---|---|---|---|---|
| Metformin ER | Generic | $8.50 | $1.00 | $15.00 | ($5.50) |
| Janumet | Non-Preferred Brand | $450.00 | $1.00 | $50.00 | $401.00 |
| Ozempic | Preferred Brand | $890.00 | $1.00 | $50.00 | $845.00 |
| Atorvastatin | Generic | $4.00 | $1.00 | $15.00 | ($10.00) |
Your Task
1. For the Janumet claim, was the member's copay applied correctly? If not, what is the financial impact to the client?
Answer:
No, the copay was applied incorrectly. Janumet is a Non-Preferred Brand, which requires a $100 copay. The member was only charged the Preferred Brand copay of $50. This means the client was overcharged by the $50 difference, as they had to cover the portion the member should have paid.
2. For the Ozempic claim, calculate the contractually correct Net Amount that should have been billed to the client. What is the overcharge?
Answer:
The client was overcharged by $4.00.
Methodology:
Using the Client Cost Formula: $$(\$890.00 \text{ Ing Cost} + \$1.00 \text{ Disp Fee}) - \$50.00 \text{ Copay} = \$891.00 - \$50.00 = \$841.00$$ The PBM billed the client $845.00, resulting in a $4.00 overcharge. This indicates that the PBM may have incorrectly added the separate $4.00 admin fee into the claim cost instead of invoicing it separately.
3. The Metformin and Atorvastatin claims result in a negative amount billed to the client. What does this signify, and why is auditing these "clawback" claims important?
Answer:
A negative amount signifies a "clawback." This occurs when the member's copay ($15) is greater than the total pharmacy reimbursement for the drug (e.g., $5.00 for Atorvastatin). The PBM pays the pharmacy $5.00 but collects $15.00 from the member at the point of sale, resulting in a $10.00 surplus that should be credited back to the client.
Importance of Auditing:
It is critical to audit these claims to ensure the PBM is actually crediting these surplus amounts back to the client. In less transparent contracts, PBMs have been known to retain these over-collected copays as another form of hidden revenue.
The Scenario: Designing a Cost-Effective Formulary Strategy
A self-funded manufacturing company with an aging, unionized workforce is experiencing a 15% annual drug trend. Their current PBM plan is a very generous "open formulary" with no utilization management (e.g., prior authorizations, step therapy). They have hired you as their CPBP consultant to design a new, more cost-effective formulary strategy that generates savings while minimizing employee disruption and adhering to clinical best practices.
Drug Spend Analysis & Employer Profile
Top 3 Drug Classes by Annual Spend
| Class | Annual Spend | High-Cost Drivers |
|---|---|---|
| Diabetes (Non-Insulin) | $2.5M | Ozempic (GLP-1), Jardiance (SGLT2), Januvia (DPP-4) |
| Inflammatory Conditions | $1.8M | Humira, Stelara, Enbrel |
| Antidepressants | $0.9M | Trintellix, Viibryd, plus all generic SSRIs/SNRIs |
Employer Profile & Goals
- Workforce: Older, unionized, and highly sensitive to benefit changes.
- Primary Goal: Reduce drug trend significantly without causing major employee complaints.
- Clinical Context: Guidelines now strongly prefer GLP-1s and SGLT2s over DPP-4s for diabetes patients with heart disease. Generic SSRIs are first-line for most depression cases.
Your Task
1. Propose a utilization management strategy for the Diabetes class that aligns with clinical guidelines and saves money. How would you manage the clinically inferior agent, Januvia?
Answer:
The strategy is to create a Preferred Drug List. Based on clinical guidelines and likely rebate potential, make Ozempic (GLP-1) and Jardiance (SGLT2) the two **preferred** agents with the lowest brand copay. Januvia (DPP-4), being less effective for cardiovascular risk, would be moved to **non-preferred** status with a higher copay. To steer new patients to the preferred agents, you would implement a **step therapy** prior authorization on Januvia, requiring a documented trial and failure of a preferred agent first.
2. To address member disruption, what is "grandfathering," and how would you apply it to the formulary changes for Januvia and Trintellix?
Answer:
Grandfathering is a strategy where existing patients on a medication are exempted from new restrictions for a certain period. To minimize disruption:
- You would apply this by allowing any member with a history of filling Januvia or Trintellix in the last 6 months to continue receiving them at their current copay without needing a new prior authorization for the first year of the new plan.
- The new restrictions (step therapy, higher copay) would only apply to new starters. This prevents complaints from stable patients while still capturing future savings and steering new therapy to more cost-effective options.
3. Why would you advise the employer to be extremely cautious about making changes to the Inflammatory Conditions class (Humira, etc.) in the first year of a new formulary strategy?
Answer:
Making changes to this specialty biologic class is extremely high-risk from a member disruption perspective. Patients on drugs like Humira are often stable after years of therapy for severe conditions like rheumatoid arthritis or Crohn's disease. Forcing a switch to a different agent ("non-medical switching") can lead to loss of disease control, development of antibodies to the new drug, and severe patient and provider dissatisfaction. Given the employer's highly sensitive, unionized workforce, starting with changes in this class would likely cause significant complaints and jeopardize the entire cost-saving initiative. It is strategically wiser to achieve savings in other classes first, build trust, and then approach the complex biologics class as a separate, more delicate project in a future year.
