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| February 23, 2023 City Council Regular Meeting | |
| Title 18. Authorize the City Manager to Execute a Contract for a Pharmacy Benefit Manager with Maxor in the Amount of $18,684,650 over three (3) years. The contract is used by the City of Savannah to provide pharmacy prescription services for the self-funded pharmacy plan. (Human Resources) | |
| Strategic Priority Good Government | |
| Description This is to award an annual contract for a Pharmacy Benefit Manager to Maxor in the amount of $18,684,650 for the guaranteed Average Script Price (ASP) of $60.04 in 2023, $60.40 in 2024, $60.71 in 2025, and a specialty drug program discount rate of 17.56% from 2023-2025. The approximate annual cost will amount to:
FY 2023 - $5,981,855 FY 2024 - $6,223,667 FY 2025 - $6,479,127 The total guaranteed three-year contract will cost approximately $18,684,650. Based on estimated future spend and historical claims data, the City of Savannah’s Pharmacy plan is projected to cost the City of Savannah $23,606,318 from 2023-2025. The total guaranteed cost savings from this three-year contract is $4,921,669.
Background: The contract is used by the City of Savannah to provide pharmacy prescription services for the self-funded pharmacy plan. The premium coverage is calculated based on an Average Script Price per prescription in the City’s self-funded pharmacy plan. The achieved Average Script Price for our general drugs on our CVS plan was $83.93 in 2018. For our volume of business, the market Average Script Price (RFP competitive market) for the general drug is $55 to $60. The number of 30-day general drug scripts in 2018 was 77,633 for the City of Savannah. With similar future use and our Average Script Pricing contract with Maxor, the City will enable a guaranteed average script price of no greater than $60.38 and a savings over a 3-year period of $4.9 million dollars to the prescription drug plan.
In other words, ASP creates a competitive environment for the Pharmacy Benefit Manager to bid an average script price versus an unpredictable number such as $83.93. The strategy enables the City to transfer the risk of rising costs, managing inflation, budgeting effectively, and keeping our benefit costs low each year for our employees. For this reason, 6-month and annual audits are performed during the duration of the contract to recoup additional costs, and to ensure data reported by our Pharmacy Benefit Manager is accurate. If for some reason, the average script price is higher than the bid number during the course of the contract, the PBM is required to reimburse the City. The contract will be effective April 1, 2023 and expires on December 31, 2025. This is the most cost effective plan for the City based on previous market assessments. The bid was advertised, opened, and reviewed by USI Insurance Services, the City’s Employee Benefits Consulting Firm. The contract term expires on December 31, 2025. Delivery: As needed. Terms: Net 30 days.
The bidders were:
B.P. Maxor (Amarillo, TX)(D) $18,864,650
Express Scripts (St. Louis, MO)(D) $20,435,228
Welldyne (Lakeland, FL) (D) $21,444,730
Optum (Eden Prairie, MN) (D) $25,087,589
A pre-proposal conference was not conducted (D) Indicates non-local, non-DBE business.
Local vendors notified via the supplier portal: No
Total sent: 4
Total received:4
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| Recommendation Approval | |
| Contact Jeff Grant, Senior Director, Human Resources | |
| Financial Impact Expenditure of $18,684,650 from the Risk Management Fund | |
| Review Comments | |
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Attachments Exhibit 1: Funding Verification - Pharmacy Benefit Manager.pdf Exhibit 2: Purchasing Notes - Pharmacy Benefit Manager.pdf |
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