Pharmacy Contracting

Contract review of a third-party administrator produces more than $300,000 in savings.

Client profile

Multi-state labor union group with more than 4,000 members and their families.

Challenge

The client’s third-party administrator (TPA) was acting as its consultant. To ensure that the TPA was advocating in the best interest of the plan, the client hired us as a consultant to audit its benefits program and provide independent, balanced advice and recommendations.

Solution

We immediately conducted an audit of the client’s existing vendor contracts and identified several terms and provisions that were not in the best interest of the client, including one that provided for undisclosed commissions payable to the TPA.


Outcome

We produced more than $300,000 in savings for the client through the following activities:

  • Renegotiating the contract with the Pharmacy Benefit Manager (PBM) to eliminate the ineffective PBM consultant. Among the contract changes was a provision that allowed the commission to flow directly to the client, which created $260,000 of savings over a three-year period.
  • Renegotiating the annual PBM service fee to save $10,000 annually.
  • Removing commissions payed for other products, which yielded $20,000 of savings annually.

Pleased with the findings in the initial audit, the client went on to retain us to create a request for proposal for financial services, which led to an additional $18,000 of savings annually.