Which type of PBM contract includes shared savings or losses at the end of the year?

The shared savings contract is distinguished by its structure, which integrates the concept of performance-based financial incentives. In this contract type, the pharmacy benefit manager (PBM) and the payer work collaboratively to manage costs, typically involving a model where savings achieved through effective management of pharmacy benefits are shared between the parties. This means that if the actual costs of the pharmacy benefits are lower than initially projected, the savings are then distributed according to specified terms outlined in the contract.

Conversely, the other contract types do not have this shared savings feature. For example, a capitated contract involves a fixed payment made per member for a defined set of services regardless of the actual service utilization, not incentivizing cost savings or loss sharing specifically. A fee-for-service model compensates the PBM based on the quantity of services provided rather than the efficiency or cost-effectiveness of those services. A fiduciary contract entails a relationship where the PBM acts in the best financial interest of the payer but does not typically include mechanisms for shared financial outcomes or savings at year-end like the shared savings model does.

Understanding these distinctions clarifies why shared savings is the correct choice, as it directly involves the concept of distributing financial gains or losses based on performance outcomes, setting it apart from