The Pharmacy Carve-Out Strategy
The Challenge
Despite being a healthcare provider, the organization’s own employee pharmacy spend was increasing rapidly due to the high cost of specialty medications. They were utilizing a bundled pharmacy benefit manager that lacked transparency regarding rebates and pricing structures.
The IMPACT
The high cost of these medications was impacting the system’s operational budget, originally intended for equipment upgrades. It created a situation where the hospital was providing excellent care but struggling to maintain a sustainable benefits program for its own staff.
The Strategy
JA executed a pharmacy carve-out, unbundling the drug spend from the medical plan and moving it to a transparent, pass-through pharmacy benefit manager. We conducted a thorough audit of specialty claims to ensure the organization was paying fair market rates.
THE OUtcome
This strategy yielded substantial savings in the first year without changing employee copays. This outcome allowed the hospital to reinvest capital into clinical enhancements, directly benefiting both the staff and the local community.
Things Employers Should Consider
Pharmacy is often the most opaque part of a benefits plan, yet it is where the most significant hidden costs often exist. Employers should demand a contract where the provider does not profit from the drug price itself, but rather from a transparent management fee. Taking this step requires a partner with deep actuarial knowledge to ensure that savings are not being offset by hidden line items elsewhere.