As benefit consultants, we’re constantly challenged with ways to reduce overall healthcare costs for our clients. One option that can be overlooked is analyzing their pharmacy benefits and what type of contract models they’re using. It can be a daunting task, but it’s certainly one that can be achieved with the right guidance.

In the Pharmacy Benefits Management (PBM) world, several pricing contract models are utilized. The two most popular are Pass Through and Traditional (or Spread).

So, what’s the difference between a Pass Through contract and a Traditional contract, you ask? Well, sit back – hopefully, I can shine some light on both.

Which PBM is right for you?

A Pass Through model offers the following options:

  • Contracts are fully disclosed and transparent
  • The client pays what the PBM pays
  • PBM passes all discounts and rebates back to the client
  • The client pays an administration fee to PBM for each claim or on a PMPM arrangement
  • Gives client greater control over pharmacy spend

A Traditional model offers:

  • Zero or greatly reduced administration fees, which equal less out of pocket costs for the client
  • Share in rebates and discounts
  • Not transparent
  • Most popular model, but not necessarily the best option

Both types of contracts have their pros and cons. But before a choice is made, you should complete a true analysis of each model to determine which is best for your situation.

We are always here and eager to assist you and a Marsh McLennan Agency (MMA) advisor just a step away. If you require any assistance in selecting the right model or need further explanation, please do not hesitate to reach out to us.

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