Pharmacy Benefit Management

Concurrent Drug Utilization Review

Real-time claims adjudication benefits all parties. The prescription is analyzed based on data collected from all pharmacies before it is dispensed.

The prescription is compared to the patient history:

  • duplicate prescription
  • duplicate therapy
  • drug interaction
  • compliance - too early or too late refill
  • incorrect dosage, gender, age

Cost control:

  • patient eligibility
  • coordination of benefits
  • drug formulary
  • ingredient cost and mark-up price limits
  • dispensing fee limits

Prospective Utilization Review

The detailed data captured by the claims system can be used to project future experience.

  • formulary management
  • targeted intervention
  • health information
  • project mortality and morbidity

Reference-based Pricing

Reference-based pricing (RBP) contains cost by limiting the reimbursement level of therapeutic classes. The costs of various drug therapies differ significantly. RBP establishes a specific cost per day as the reference and uses that amount to limit reimbursement for all drugs with the therapeutic effect of that class.

Drug Formulary

There are numerous drug formularies that can help you identify which pharmaceuticals will be covered. It is important to use one that meets the needs of the plan members and satisfies the intent of the benefit program.

Dispensing Fees

Consider limiting the dispensing fee to $9 per prescription and permit the dispensing of a 90 day supply.
Approximately one third of prescription drug cost is generated by the professional dispensing fee. The dispensing fee is clearly identified on prescription drug receipts and range between $5 and $12 per prescription. Some pharmacies double the dispensing fee if they fill more than one month's supply of a drug.

Some pharmacies have other charges such as stock charges for expensive drugs

Generic Drugs

The Prescription Drug Cost Regulation Act 1986 [Section 7] requires pharmacist to provide the lowest cost interchangeable product in inventory. However, If the doctor writes "no substitution" or the patient requests a particular brand, then the drug requested will be dispensed.
Many plan sponsors only cover the cost of the lowest price interchangeable product.

Trial Prescription Program

When a patient is prescribed a new medication that is both expensive and is known to have high incidence of side effects the pharmacist may initially dispense of a small quantity (10-14 days supply) to discourage waste when the medication is not well tolerated.

Ingredient Cost

Drugs included on the Ontario Drug Benefit (ODB) formulary have a 10% mark-up on the best available price. Other drugs can have any mark-up the pharmacy chooses. Some preferred providers will limit the mark-up to 20% of the best available price.

Preferred Providers

Mail order pharmacies often have lower dispensing fees and mark-ups than their retail competitors. Some retail pharmacies will negotiate with employers to compete with other preferred providers.
It is most effective to design the plan with the cost containment features noted above and let employees select the distribution channel. Pharmacies do make errors and the most cautious approach is not to recommend a pharmacy to employees.


Drugs that require a prescription that are used to treat an illness or injury are normally covered. It is common to exclude preventive or cosmetic treatments.
Some plan specifically exclude certain drugs or treatment of specific conditions. This appears to be discriminatory and caution should be used. It may be more effective to have general limitations that accomplish the same results.


An annual drug maximum per family member limits liability to the risk that the employer can afford to take.