Lesson on Limited Distribution Drugs & Specialty Rebate Guarantees

Top 3 Things You’ll Learn

  1. What to look for in a pharmacy contract to understand specialty drug rebates
  2. How limited specialty lists impact drug rebate guarantees for pharmacy benefit plans
  3. Tips to evaluate the specialty rebate terms in your clients’ pharmacy program contracts

When reviewing a pharmacy benefits contract, it is important to understand how prescription drug rebates are used to deliver the lowest net cost for your clients’ plan. However, given the complexity of many standard pharmacy benefits contracts, it can be challenging to understand exactly what drugs qualify for rebates and specifically how specialty drug rebates are applied to the pharmacy benefits plan. Various factors outlined in the contract terms must be considered, including what qualifies as a specialty medication, how limited distribution drugs (LDDs) are treated, the number of drugs on the specialty list, the distribution channels, etc. Each of these could significantly impact the amount of rebate dollars your clients receive. Consider these tips to evaluate the specialty drug rebate terms in your clients’ contracts.

Each PBM and carrier uses different contract language and terms to define how drug rebates apply to specialty medications and limited distribution drugs. Misaligned contract guarantees could mean the difference in thousands of rebate dollars for your pharmacy plan.

You want to know, are LDDs included or excluded from the specialty rebate guarantee?

When you see the specialty drug rebates listed in the pharmacy benefits contract, always verify whether LDDs are included in the rebate guarantees. This is not always as clear-cut as you may think. Look at the contract language to see if you can tell if LDDs are included or excluded from the specialty rebate terms.

If you see that LDDs are not listed, then they must be included in the specialty rebate guarantee, right? Not so fast…

To know for sure, your next step is to check how the specialty category is defined in the contract. Determining which drugs are included and excluded from the specialty list is crucial because there is no one universal definition of specialty medication. In fact, the specialty definition and specialty drug list vary by pharmacy benefit manager (PBM) and carrier. Identifying what is included in a specialty definition can significantly impact the rebate revenue that is generated by your clients.

Review the specialty drug definition in the contract. From the contract definition, you likely will realize that LDDs are not considered specialty drugs. A common red flag is a high specialty rebate guarantee; it often means that the PBM/carrier is using a smaller list of specialty medications. If the PBM or carrier contract utilizes a limited specialty drug list, then your clients will retain fewer rebate dollars than they earned.

By understanding how definitions are used in pharmacy benefits contracts, you can project more accurate rebate guarantees for your clients and ensure that the contract offer is the best fit for them. Check out our Contract Best Practices e-book for more tips on how to ensure your clients’ pharmacy benefits contracts align with their best interests, not the PBM’s or carrier’s.

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