Case Studies

Case Study No. 1

Our client is a distribution company in the Midwest. They have approximately 5,000 employees and 11,000 total members. Stephens Consulting Services (SCS) began Audit services in August of 2006. Unfortunately, the PBM delayed the audit process and remains unresolved to date. In June 2006 SCS signed a contract to provide RFP Service to our client. The RFP requested transparent quotes from providers. A timeline, the RFP questionnaire and a claims file of 41,000+ claims was forwarded to six PBM’s for processing. The PBM’s were to review the SCS written contract, note their concerns and return it with a completed RFP questionnaire. The expectation is that the provided contract would be the contract used with as few changes as necessary. SCS utilized our software to review the returned claims and produced a data analysis that compared the PBM’s savings potential.

The results of the Data Analysis ranged from a 2.1% to 14.4% savings with the incumbent bringing back a 9.2% savings based on approximately a seven million dollar drug spend. Finalists were interviewed concerning transition, implementation and disruption. Guarantees approaching the results of the data were negotiated, methodology for calculating the savings was agreed upon and both were entered into the contract. The contract also contained a provision for the PBM to send all processed claims in an agreed upon format to SCS twice monthly, the current MAC List, definitions of AWP Source, Brand/Generic Determination, DAW logic, yearly renegotiation of rates and rebates and transparency holding the PBM to a single source of revenue, Administration Fees. The Agreements were signed and our client had a new PBM and a new lease on pharmacy benefit management services starting January 1, 2008.

In March of 2008 SCS requested Implementation Sheets, data and additional information from the current PBM in preparation for an audit of the first three months of PBM processing. Within two weeks of the initial information request the PBM informed SCS that there was a problem with the billing rates. The problem was found to be the PBM omitting the MAC pricing on Mail Service generic claims. Our quarterly Audit procedure revealed an overcharge of $101,000. The client has received the reimbursement and through our monthly review of data, we have verified current contract terms are being used.


Case Study No. 2

Stephens Consulting Services (SCS) began working with a southern trucking firm in late 2004. The firm has over 5,000 employees and over 10,000 participating members in their pharmacy plan. The 2004 pharmacy benefit plan was a well designed 3-tiered copay plan serviced by a major pharmacy benefit manager (PBM). Our first discussions with the firm were about moving to a more “transparent” contracted pricing that would assure better generic pricing and a better outcome even with an increase in administration fees. The firm’s management elected to renegotiate contract pricing in lieu of moving to a totally “transparent” contract. The contracted pricing was improved and the plan was moved to a more limited formulary. With the copay design in place, both changes helped move the members to a higher level of generic utilization and even some elimination of marginal prescriptions purchased.

The next contract change was for 2006 and 2007. The plan was moved to a “transparent” pricing and increased administration fee. With this move, the brand AWP % discount was decreased but in trade, we took advantage of “pass-through” pricing and better discounts on generics.

The tables show “savings” for 2007, showing the financial difference obtained in plan changes and contract negotiation.

Generic Transition

The most dramatic change occurred in both Generic utilization and the drop in Generic discount. The 54.3% decrease in Retail Generic cost per claim shows the potential for “transparency” contracting.

The savings per Brand claim was less dramatic but still significant. Most PBMs offer formulary choices with some form of this type of “restricted” or “limited” formulary. Even with a single formulary, plan design options with Step Therapy, Quantity Limits and strong Prior Authorization rules can affect the outcome in this manner.

Total Transition

The savings for 2007, compared to the 2004 level of contract terms was $6,860,232.

A potential move for this firm is a reduction in Administration Fee and a more realistic average Rebate per claim……..our next negotiation.


Case Study No. 3

Stephens Consulting Services (SCS) was retained to aid a hospital district in Texas to develop a state mandated pharmacy program for the area’s indigent population. The group’s membership is for people who do not have private insurance and meet certain eligibility criteria for the Plan.

SCS was initially contracted to analyze the pharmacy claim data for the pharmacy program. An analysis was performed and renewal negotiations with the PBM commenced along with a search for alternate PBM services. The final decision for the ongoing PBM services and the need for a full RFP has not been reached at this time.

The program is mandated to stretch their allotted dollars as far as possible. Following discussions with the group’s personnel, SCS agreed to produce a software program to assist in triaging all new and refill prescriptions being provided to the members. The one of a kind software triage program encompasses all of the restrictions of the pharmacy program while performing direct generic and therapeutic interchange suggestions, recommendations and associated savings. The program also tracks the three prescription fill allowance outlined by the program, suggests the possible Pharmacy Assistance Program (PAP) availability from pharmaceutical manufacturers and suggests possible claims to be filled through the pharmacy discount program in partnership with the National Association of Counties.

Recently, SCS was able to incorporate client specific pharmacy claims history in to the program allowing the group personnel to see the pharmacy claims history while discussing current pharmacy needs and triage information with each of their clients all within one program.

This service, while unique, demonstrates the data analysis and computer innovation capabilities of SCS. This alliance also shows the breadth and depth of SCS’s commitment to its clients.


Case Study No. 4

Stephens Consulting Services (SCS) was contracted last year to conduct an audit for a large metropolitan county in Illinois. The County has over 30,000 active lives and close to 20,000 retiree lives. The audit revealed overcharges of over $350,000 for the active group and $70,000 for the retirees. The plan design for the audit period was a simple, flat and single tiered copay that had a Member copay share of less than 10%. During the audit, through our discoveries, the County instituted a 3-tiered copay. An open plan for drug coverage was tightened. Several unacceptable PBM processing procedures brought to light by the audit were examined and changed with the PBM. Total savings for this year are estimated to exceed $5 million.


Case Study No. 5

Stephens Consulting Services (SCS) was contracted to conduct an audit for a southern Missouri health plan with membership over 35,000 lives. The audit of a major PBM revealed inaccurate processing of MAC pricing, several drug coverage issues, missed copay penalties for DAW assigned claims and even a large dollar amount of missed dispensing fee assignments. SCS investigated the PBM savings program designed to adjust prescribing habits and member compliance. The result showed the PBM expense greatly exceeded the savings and the program was dropped. Due to inflexibility of the PBM to improve pricing and to make processing and contract changes, the group had us conduct an RFP for a new PBM. The RFP was conducted and a new PBM was hired. With changes made to PBM processing, better pricing on generics and elimination of an inappropriate “savings” program, a look back survey shows the group saving up to $2 million per year.


111 Center Street     |     Little Rock, Arkansas 72201     |     Ph: 501.377.2300     |     Tf: 800.643.9691