What does "Shared Savings" in PBM contracts typically refer to?

"Shared Savings" in Pharmacy Benefit Manager (PBM) contracts typically refers to the concept where costs saved through effective management and optimization of pharmacy benefits are distributed or "shared" between the PBM and the payer or client at the end of a specified period, usually annually. This arrangement incentivizes the PBM to implement strategies that reduce overall drug spending while improving quality of care and provides a mechanism for clients to benefit from these savings.

The structure promotes a cooperative relationship where both parties work together towards reducing wasteful spending on medications, thus aligning the interests of the PBM and the plan sponsor. By focusing on efficiency and strategic management practices, PBMs can potentially generate significant savings, which can be shared according to the terms outlined in their contracts, leading to mutual financial benefits.

Other options pertain to different billing or payment structures rather than a shared savings model. For instance, fixed fees or per prescription fees represent straightforward pricing methods rather than a performance-based cost-saving strategy. Meanwhile, paying only for services rendered aligns more closely with a fee-for-service model, which does not encapsulate the concept of shared risk or reward inherent in a shared savings agreement.