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3 Key Tips for Evaluating Your Pharmacy Benefits Before a Merger or Acquisition

Wednesday, May 10, 2023
Elizabeth Letke
Evaluating Pharmacy Benefits

When considering a merger or an acquisition, reviewing the employee benefits strategy is essential for several reasons. Ensuring you retain key employees, cost control and compliance are all usually top of mind. However, reviewing pharmacy benefits and spend is becoming increasingly vital pre-transaction. A comprehensive review of benefits design, formulary, co-pays and reimbursement rates will identify any discrepancies.

Here is a list of key tips for you as you evaluate your pharmacy benefits before a merger or acquisition:

Focus on Specialty Drugs

Specialty drugs are high-cost medications that require special handling and/or administration, such as injectable and infused drugs, biologics, and oral medications used to treat cancer. These drugs tend to be complicated and require more intensive patient management, which can drive up the cost of care.

Specialty drugs are becoming an increasingly important part of the pharmacy market and increasingly popular with plan utilizers. It is important to understand the potential impact of specialty drugs on the cost of care, as well as any cost-saving measures that can be implemented. Additionally, you should consider the impact on patient access and adherence, as some of these drugs may not be covered by existing plans. Before completing a merger or acquisition, current specialty Rx spend should be reviewed as well as the specific Pharmacy Benefit Manager contract.

Evaluate the Current Pharmacy Benefit Manager (PBM)

When it comes to pharmacy benefits, employers are demanding more transparency and more efficiency. Are the terms of the benefits clearly outlined? Are there any hidden fees or restrictions?

It is important to analyze the current pharmacy benefits for each company, specifically reviewing the coverage, network-adequacy, cost-sharing and use of the benefits. You will want to consider how the pharmacy benefits fit into the overall strategy of the new combined organization.

Additionally, review the fees associated with dispensing medications. Are there any discounts available to patients? Are there any additional fees that could be charged to patients? Depending on the goals of both the private equity firm and portfolio company, it is important to determine whether a traditional PBM model that offers high rebates and volume discounts to achieve cost savings versus a pass-through PBM which offers 100% transparency and all rebates back to the employer.

After evaluating the current PBM, develop a plan to address any changes and ensure employees that they will have access to the benefits they need while minimizing costs to the company.

Consider New Technological Advances in Biosimilars and Gene Therapy

Biosimilars are biological products that are similar to already-approved biological products. They are intended to be interchangeable with and have the same clinical effect as the original biological and can significantly drive down the cost of treatment. Gene therapy is a way to treat or prevent disease but introducing genetic material into the body. Although a relatively new field, it has the potential to change the way that many high-cost diseases are treated.

It is important to think about the regulatory landscape of biosimilars and gene therapies in the countries or regions where the merger or acquisition is taking place. The regulatory framework governing the approval, pricing and reimbursement of biosimilars and gene therapies may vary from one country to another or may be in the process of development. It is also helpful to understand the current and potential market access of biosimilars and gene therapies, which includes the potential reimbursement policies, the availability of biosimilars and gene therapies in the target country, and the potential market size for biosimilars and gene therapies.

Additional Considerations While Evaluating Pharmacy Benefits

  • Analyze the formulary to ensure that it includes the medications that patients need. Is it comprehensive enough to cover all medications? Are there any restrictions or limitations that could affect patients?
  • Assess the quality of care associated with the pharmacy benefits. Are there any initiatives in place to ensure that patients are receiving the best possible care? Are there any incentives for pharmacists to provide quality care?
  • Ensure that the pharmacy benefits are compliant with all applicable laws and regulations. Are there any red flags that could lead to legal issues down the road?

By examining the pharmacy usage and current benefit plan of a company prior to a merger or acquisition, it is important to be aware of what is on the cutting edge to make sure that the health plan runs as efficiently and cost effectively as possible. Do you need any assistance reviewing your pharmacy benefits? Reach out to Horton’s M&A team to take the next steps to ensuring this process operates smoothly.

Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.