Q1: What is PBM Checkup?

PBM Checkup is an innovative tool designed to help our Stop Loss policyholders and Group Captive program members  be educated consumers, so to speak, about their pharmaceutical benefits. The way it works is fairly simple: you select an approved, independent Pharmacy Benefit Manager (PBM) consultant from our list to evaluate your current PBM and provide them with your claims data. Then, they compare your current PBM to five alternatives and provide a line-item repricing report, as well as estimated cost savings.

At that point, you have a choice: either stay with your current PBM or change to a recommended one. Either way, you can receive up to a 2% credit on your Specific Stop Loss rates at your next renewal.

Q2: Why did you decide to launch PBM Checkup now?

PBMs and, more broadly, pharmaceutical costs, have been in the public eye for a while now. It seems like every few months there’s a news story about high drug prices and how they’re affecting working Americans. There are real problems that underlie the way that drugs are purchased and financed, and that’s what we decided to address. It took some time to ensure that we got all the necessary information and came up with a solution that made sense for our policyholders.

Prior to the advent of specialty drugs in the early 2000s, an employer’s spend on pharmaceuticals was significantly lower than it is today. Official numbers suggest that pharmaceuticals accounted for 11% of overall medical costs in 2022[1], but unofficial estimates place that number higher.

Our launch of PBM Checkup is timely, because it helps plans show fiduciary responsibility with monitoring and selecting PBM contracts. Fiduciary duty involves making thoughtful, well-informed decisions. PBM Checkup provides employers with a structured, unbiased analysis of pharmacy costs across at least five different PBM contracts. There have been recent lawsuits over breaches of fiduciary responsibility in the pharmaceutical sector that  highlight the need for strong oversight.

“We believe switching to an independent, transparently run PBM can be an excellent option for most Stop Loss policyholders and Group Captive program members.”

Q3: You said that the number on overall pharmacy spend may be higher than 11%. Why are there differing estimates?

The way drugs are categorized varies by provider type and administration setting. Drugs delivered through traditional retail or mail order pharmacies are generally covered by the pharmaceutical benefit and managed by the PBM.

However, a large portion of drugs are administered in hospitals, outpatient clinics, or physician offices and are covered under the medical benefit. When you add up all drug spending – through both the pharmacy and medical benefit plans – estimates can be 30% or more. This can be difficult to pin down, as the RAND Corporation indicated in a study – inconsistency in reporting makes an analysis of the relationship between drug prices and premiums quite hard.[2]

Q4: Why has Rx spend increased so much in recent years?

In short, spending is up due to two main factors:

• Higher utilization – the number of prescriptions written and the number of available drugs on the market that patients can access; and
• Higher cost

The average price of a newly launched drug in 2023 tops $300,000[3]. This average is partly skewed, due to advances in areas like cell and gene therapy, where it’s commonplace to see costs exceed $1 million[4].

Another factor is the misaligned financial incentives and lack of fee transparency that are often found in PBM contracts. Many PBM contracts are not transparent and do not pass through rebates to the end consumer.

We believe that if self-funded employers pay more attention to the terms of their PBM contract and choose a more transparent PBM, then they can lower costs for themselves and their employees. That’s the main reason we’ve launched this program.

Q5: Can you tell us more about the independent consultants who perform the PBM Checkups?

First off, I’d like to reiterate that the policyholder does not need to switch PBMs to qualify for the renewal credit. Our role is advisory, not prescriptive, and I think that it’s important to remember this. If you decide that your current PBM is the best option for you, then you’ll still receive the discount.

That being said, we believe that switching to an independent, transparently run PBM can be an excellent option for most Stop Loss policyholders and Group Captive program members. We have evaluated a number of potential solutions, but the recommendations are made by independent consultants. We are not affiliated with these consultants, nor do we have any ownership stake in them, meaning that their recommendations are truly independent. Most of their recommendations are PBMs that are friendly to self-funding and that work on a fixed pricing model, which we believe is the way forward for most self-funded employers.

If you are a current Stop Loss policyholder or Group Captive program member of Berkley Accident and Health, you can use this service to gain more insight into your Rx costs, as well as receive up to a 2% Stop Loss renewal credit. Ask your Berkley Accident and Health representative how to get started.

[1] Prescription Drug Spending | U.S. GAO

[2] Prescription Drug Prices, Rebates, and Insurance Premiums | RAND

[3] Prices for new US drugs rose 35% in 2023, more than the previous year | Reuters

[4] Managing-the-Challenges-of-Paying-for-Gene-Therapy-_-ICER-NEWDIGS-White-Paper-2024_final.pdf

Stop Loss is underwritten by Berkley Life and Health Insurance Company and/or StarNet Insurance Company, both member companies of W. R. Berkley Corporation and rated A+ (Superior) by A.M. Best, and involves the formation of a group captive insurance program that involves other employers and requires other legal entities. Berkley and its affiliates do not provide tax, legal, or regulatory advice concerning EmCap. You should seek appropriate tax, legal, regulatory, or other counsel regarding the EmCap program, including, but not limited to, counsel in the areas of ERISA, multiple employer welfare arrangements (MEWAs), taxation, and captives. EmCap is not available to all employers and may not be available in all states. Payment of claims under any insurance policy issued shall only be made in full compliance with all United States economic or trade and sanction laws or regulation, including, but not limited to, sanctions, laws and regulations administered and enforced by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”).

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