Title:
Consider and take action on a resolution authorizing additional expenditures under the three-year Pharmacy Benefit Management (PBM) Services contract with Employers Health - CVS for associated costs through the remainder of the contract term (Director of Human Resources and Civil Service)
Background:
Approval of this item will revise the estimated annual cost associated with the existing three-year Pharmacy Benefit Management Services contract with Employers Health - CVS and clarify that the estimated annual cost is not a not-to-exceed contract limitation.
On August 12, 2025, via Resolution No. 2025-133, City Council approved a three-year contract with Employers Health - CVS for pharmacy benefit management services effective October 1, 2025. The approved agenda item identified the contract amount as not to exceed $1,500,000. The supporting background, however, described the amount as an estimated annual cost ranging from $1,207,874 to $1,500,000 depending on actual rebates received.
Actual pharmacy plan experience has exceeded the original annual estimate. The 2026 Midyear Plan Performance Review covering October 2025 through June 2026 reports approximately $2.04 million in gross pharmacy cost. The review also reports approximately $568,283 in rebate payments and estimated rebate payments through the second quarter of 2026.
Based on current plan experience, staff estimates annual gross pharmacy costs of approximately $2,400,000. Anticipated annual rebates are estimated at approximately $600,000, resulting in an estimated annual net pharmacy cost of approximately $1,800,000. Staff anticipates using these estimates for the remaining years of the existing contract.
Pharmacy costs and rebates will vary based on actual plan utilization, prescription drug costs, member experience, and rebate performance. Accordingly, the amounts provided are planning estimates and are not intended to establish a not-to-exceed contract limitation.
This action does not chan...
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