Why Carved-Out Pharmacy is the Key to Your Success

Top 3 Things You’ll Learn

  1. How carved-out pharmacy benefits fits into today’s healthcare market
  2. Value of a carved-out arrangement for middle market employers
  3. Three reasons why a carved-out pharmacy contract may be best for your self-funded clients

Corporate mergers, acquisitions, and new subsidiaries dominated the pharmacy benefits industry last year. CVS Health buying Aetna, Cigna buying Express Scripts, and Anthem starting its own pharmacy benefits manager (PBM) – to name a few. With the emergence of these new healthcare entities, many are wondering how carved-out pharmacy arrangements fit in to the conversation.

For non-Fortune 100 companies, or those in the middle market, carving-out pharmacy is still a critical component of managing health care benefits, especially for self-funded employers. Without having the scale of the large enterprises, non-Fortune 100 companies continue to face a financial, service and clinical disadvantage in many carved-in pharmacy arrangements. Under a carved-in plan, your clients are in a bundled medical and pharmacy benefits contract. As a result, they are sacrificing aggregate purchasing and contract negotiation opportunities that have the potential to yield substantial prescription drug savings for their plan and their members. In contrast, a carved-out pharmacy arrangement unbundles the pharmacy from the medical benefit and provides the dedicated pharmacy expertise and tailored solutions to ensure that their pharmacy benefit receives the same due diligence as the medical benefit.

It’s important to note that all the major PBMs still sell carve-out plans. For example, UnitedHealth Group still has its OptumRx division, which is dedicated to pharmacy benefits. These large companies understand the need for dedicated pharmacy expertise and solutions tailored to individual companies, especially at the mid-market level. Carving-out pharmacy benefits provides that level of service.

For non-Fortune 100 companies, carving-out pharmacy is a critical component of sustainable healthcare benefit plans. #carveout #pbm

Carving-out the prescription drug program really is about having the ability to access three things: transparency, control, and insights.

Pharmacy Contract Transparency

Carving-out gives your clients access to their pharmacy utilization and pricing data, giving them transparency into what’s really happening with their benefits. When a company is carved-in, they can’t see the details behind their contract and have no guaranteed rights when it comes to pharmacy contract terms. Carving out pharmacy allows your clients to see the claims data and detailed-level reporting for their organization. In turn, you and they have a clear understanding of what they’re getting for their money and have the ability to put pricing and performance guarantees in place to support their budget and goals.

Pharmacy Program Control

Control means you – not the carrier – have the power to choose what’s right for your clients, and you don’t have to settle for what the carrier’s chosen PBM provides out-of-the-box for your clients. Unlike in a carved-in contract, with a carve-out you can offer your clients the ability to choose what’s best for their company, their employees, and their members. You will have the data in hand and access to clinical experts who will work with you to evaluate the plan options together and decide what’s best for them when it comes to their benefit design, trend management programs, contract terms, and more. The programs you and your clients select to implement will be tailored to their members’ needs and their financial objectives.


You or your clients may receive data on their trend and performance from an insurer under the carved-in arrangement, but unless you have someone on staff with the pharmacy expertise to be able to interpret the data and pinpoint your clients’ specific risk areas, it’s probably not helping your decision-making process. When your clients carve-out their pharmacy benefits, specifically with a pharmacy benefit optimizer (PBO), not a PBM, they will have access to dedicated pharmacy teams that know how to examine their pharmacy claims data and provide recommendations tailored to your clients’ objectives, not the PBM’s. This level of clear, transparent guidance is what you and your clients need to make informed decisions that will lead to a lower-cost, fully optimized pharmacy benefits program.

Despite what some carriers may say, carving-out still provides critical insights and value for companies that want to effectively manage their pharmacy spend. Rather than sit back and wait for some magic moment, you can act now to ensure your clients’ pharmacy benefit arrangement is serving them well. Making changes on your terms, instead of being forced into unwanted changes, is the only way you can ensure your clients are protected and equipped with a sustainable pharmacy arrangement.

Learn more about what it means to unbundle your clients’ pharmacy and medical benefits in our free Guide to Carving-Out Pharmacy Benefits.

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