Examining the case for direct contracting: A multistakeholder case study

Abstract

Background: Employers and pharmacies are challenged by a complex system for prescription payment. Cost plus direct contracts for prescriptions and bundled services may yield benefits.

Objectives: This study aimed to (1) explore direct contracting using multistakeholder interviews, (2) compare employer costs and employee copays for 6 months of prescription charges under their pharmacy benefit manager (PBM) with projected costs under a pharmacy direct contract, (3) project pharmacy revenue, costs, and net profit had these prescriptions been processed through the direct contract, and (4) assess employee satisfaction under the direct contract.

Methods: Semistructured stakeholder interviews were recorded transcribed and analyzed to identify different perspectives on direct contracting. Employer PBM invoices for 412 employee prescriptions over 6 months were analyzed to calculate employer and employee costs and reanalyzed for the invoice cost plus $12 professional fee direct contract. For the pharmacy financial analysis projection, invoice costs and a $9.82 cost of dispensing were subtracted from total revenue to yield an estimated profit had the parties been under the arrangement. A 34-item satisfaction survey was mailed using a 4-contact design with cash incentives to the 20 employees serviced by the direct contract that were analyzed descriptively.

Results: Eight stakeholder interviews described the benefits and potential challenges of such direct contracts. The financial analysis suggested the employer costs would be $5664 lower and employee copays would have been $1918 lower had all prescriptions been paid using the direct contract. The estimated profit for the pharmacy was projected at $899. Survey respondents were generally satisfied with the direct contract, but few used the bundled services.

Conclusion: The direct contract may be financially beneficial for all parties. It also may offer more transparent pricing that may be desirable for the employer and pharmacy. Greater uptake of bundled services may increase the value to the employer.