These are tough times. No corporation can afford to conduct business as
usual; and most CFOs in America are desperately looking for ways to
reduce costs. Yet there is one area that is often overlooked. Your
pharmacy benefit cost.
We all know health care costs are continuing their steady rise, and
pharmacy benefit cost makes up 10% to 20% of your total health care
costs. Pharmacy costs are expected to rise between 6% and 7% in 2009.
Unfortunately these costs are often hidden and neglected.
A quick way to calculate your potential pharmacy benefit savings is as
follows. Take your number of employees in thousands and multiply it by
$100,000. For example, a company with 11,000 employees has the
potential for savings of $1.1million. Ask yourself if this is a significant
enough opportunity that you want to do something about it.
For corporations with retiree medical benefits, the ruling under FASB 106
requires accrual for these benefits. The Board believes that failure to
recognize an obligation prior to its payment impairs the usefulness and
integrity of the employer's financial statements. Failure to manage these
costs has a compounding effect.
Here are five pharmacy benefit mistakes your organization may be
making that could cost the company millions.
1. Allowing Human Resources to negotiate with Pharmacy
Benefit Manager (PBM) companies without the clout of
pharmacy benefit specialists.
HR has its hands full with other priorities, is often understaffed and can
lack the scale required to get the best deal when negotiating with PBMs.
PBMs often come to your HR/Benefits team with offers to extend the
contract for incremental savings. While many HR departments have
some staff and expertise, chances are they only see PBM contracts once
every two or three years. Are they up-to-date on the latest pharmacy
pricing, trends and definitions of terms? Why take this risk when millions
could be at stake
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