Companies make high-stakes decisions every day – and this includes setting up pharmacy benefits for their employees. Employers need affordable prescription drug coverage that meets the needs of a diverse workforce, and for this they hire a pharmacy benefit manager, or PBM.

But many important decisions about a drug benefit are not made by the PBM. Rather, significant authority is retained by the employer. After all, they are funding the benefit. This is brought to life by looking at real-world examples of how PBMs compete to provide the kind of drug benefit that employers want.

The PBM market that serves employers, unions, and government programs is competitive, with 73 full-service PBMs operating today. Employers identify and contract with PBMs through a rigorous request for proposal (RFP) process, which is often driven by brokers and consultants. Benefits consultants, who operate with limited transparency, are often empowered to shape the fee, rebate, formulary, and network structures of a plan. While most employer RFPs are confidential, many from health systems, universities, and public employee programs are publicly available, showing the wide breadth of information requested and range of needs.

RFP Process in Action: PBMs Must Meet A Wide Range of Needs to Win Business

For example, one large public university system required in a recent RFP that a PBM “must be able to offer full, auditable transparency and value-based, lowest-net-cost formulary programs, allowing for flexibility and customization over the course of the contract.” Others outline the reporting they want, including rebates from drug manufacturers and reimbursements to pharmacies, with regular audits to ensure compliance.

Some ask for specific drugs to be included on formularies and provide input on how drugs are tiered. A state employee program outlined the cost-sharing details they require of a PBM and provided guidance on how a pharmacy network should be built for their employees.

RFPs go beyond financial and contracting terms. As just one example, a university system in the Midwest requested detailed information on the clinical programs and specialty management services PBMs would provide.

Another state health plan RFP required PBMs to guarantee they will provide strong service to patients with requirements for hitting targets including “Average Speed of Answer,” “First Call Resolution Rate,” and timely utilization management reviews.

It is these kinds of priorities on which PBMs compete with one another for business.

Even after contracts are signed, PBMs are subject to ongoing reporting, audits, and market checks to ensure performance and competitiveness.

At every stage, from benefit design to implementation to oversight, PBMs compete to meet the diverse needs of employers, unions, and government programs. While more transparency is needed to ensure that brokers and consultants are acting in the best interests of employers when soliciting bids, PBMs are doing their part by offering a broad range of options in a competitive marketplace.