Pharmacy Benefit Management: 5 Things Consumers Should Know

Pharmacy benefit managers ( PBM s) are paid third-party administrators of prescription drug coverage for insurers and employers.

At the heart of the supply chain of prescription drugs lie pharmacy benefit managers (PBMs), who are responsible and hold authority over the pricing of pharmaceutical supplies.

Pharmacy Benefit Management: 5 Things Consumers Should Know
Pharmacy Benefit Management (PMB) Industry. Image/AdobeStock

About 80% of consumers agree that drug prices are too high and demand that Congress do something about it in the US. As the prices soar, policymakers scrutinize PBMs as one of the options to lower the costs of prescription drugs and provide affordable medicine to consumers. [1]

However, many are unaware of the role that PBMs play in the drug supply chain and how they function for the common good of consumers. This article will bring light to consumers and discuss what PBMs are, how they operate, and other things prescription drug consumers should know.

What are pharmacy benefit managers?

A pharmacy benefit management company is a middleman who negotiates between pharmacies, drug manufacturers, and insurance companies. They are intermediaries in the pharmacy marketplace hired by employers, labor unions, health plans, and others to interact with drug manufacturers and process claims. [2]

PBMs negotiate with manufacturers and pharmacies to secure lower drug costs and deliver discounts to insurance companies, facilitating the best possible results to meet employee needs and protect their well-being.

Pharmacy Benefit Management

What role do PBMs play?

To better understand the PBM industry and the roles these managers play, here are five things consumers should know:

1. PBMs negotiate with manufacturers and reduce costs

The primary role of PBMs is to negotiate pharmaceutical costs and rebate programs with drug manufacturers to deliver competitive medication pricing across large networks of retail chains and pharmacies.

As intermediaries, they offer different programs such as quantity edits, prior authorization, and step therapy. These programs benefit health plan providers by ensuring proper usage of medications, safety precautions, and, ultimately, opportunities to save on costs.

Furthermore, PBMs also act as advisors to employers who provide their employees with clinical programs, health plans, and other medical recommendations.

2. PBMs manage and maintain a formulary list

Drug formularies are lists of prescription drugs recommended or preferred by health plan providers. It acts as a drug list vital to understanding the types of care and benefits a beneficiary can get and to ensure that a consumer doesn’t pay more for expensive drugs in place of a cheaper one that offers the same effect and treats a condition just the same. [3]

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*All individuals are unique. Your results can and will vary.

When a patient takes a prescription drug that isn’t included in their formulary list, they end up paying the drug cost from their personal expense. Part of PBMs’ role is to determine a patient’s access to a specific drug, create a medication adherence program, and set up a management system for utilization.

Moreover, the role of PBMs in managing and maintaining formulary lists directly relates to its first function, which is negotiating drug costs and managing rebates.

3. PBMs contract pharmacies for drug reimbursement

PBMs are also responsible for administering reimbursements on behalf of health plans or beneficiaries and employers. During negotiations, PBMs lay down types of contracts, payment rates, and all the responsibilities that both parties should fulfill.

Payment rates are usually based on maximum allowable costs, which indicates the maximum amount to be reimbursed for equivalent generic drugs acquired by a pharmacy. A maximum allowable cost list considers the existing and expected inventory, the market share, profit margins, and other underlying factors for reimbursement purposes.

There are many rebates program models, but, in general, PBMs handle all these reimbursements.

4. PBMs help increase patient access to medication

When PBMs function as negotiators to reduce drug costs, they can also increase patients’ access to medications. By successfully acquiring discounts from wholesale, they’re able to pass on the quantity discounts to clients and beneficiaries.

It results in mitigation of the soaring medication costs and the assurance drugs are effectively administered for the best results and the wellness of medical patients. In addition, because of the extensive network of retail and pharmacies that PBMs establish, people get greater access to proper medications they can avail themselves of from retail chains.

5. PBMs review drug utilization

Lastly, PBMs play a significant role in prescription benefit plans. People might think that it’s always about the money. But behind those rebates and lowered drug costs, PBMs conduct a drug utilization review—a life-saving program that reviews drug effectiveness, risks, and potential dangers and interactions, which help mitigate drug safety concerns.

As PBMs oversee pharmacy networks, they can also access patients’ medical and drug history, enabling them to alert their physicians to potential risks upon taking certain prescription drugs or mixing them with others.

Before any drug administration happens, it has to undergo and meet specific criteria set by PBMs, including diagnosis verification, genetic component determination, assurance of proper testing, and specialist institution during treatment.

In all, PBMs make a full effort to ensure patients and beneficiaries undergo and receive proper treatment, take the right amount, and respond well to appropriate medication.

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*All individuals are unique. Your results can and will vary.

Transparent PBMs despite industry criticisms

Like other industries and businesses, the PBM industry also faces a lot of criticism as they are common targets of government scrutiny and lawsuits. Even so, many PBM companies operate within the lines of transparency and commitment to providing fair costs and better services to consumers and patients.

Instead of spreading the price, holding rebates, and clawing back, they are those who conduct business and operate based on the actual costs. These PBM companies use a “pass-through” model wherein they pass all discounts and rebates to the health plan carrier. In this model, the only revenue the PBM earns is the administrative fee they charge to the health plan, which is often per prescription claim.

This transparent practice results in a better understanding and prediction of health costs, and ultimately, patients trust and get more confident that their prescription drugs are priced reasonably.

Transparent PBMs share data within networks to empower effective decision-making instead of keeping information from end consumers. Drug costs decrease when this network of pharmacies, health plan providers, and patient beneficiaries understand their options on prescription drugs.

Final thoughts

Employers, organizations, and health plan providers heavily rely on PBMs to deliver information, trends, and transparent services to better their offerings and improve their services. Maintaining open communication with PBMs ensures that members receive excellent care at the most reasonable cost.

On the other hand, if you’re a consumer, a clear understanding of the PBM working with your health plan saves you money, ensures your well-being, and improves your life overall in the long run.

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Dr. Keith Kantor

Dr. Kantor has a Ph.D. in Nutritional Science and has been an advocate of natural food and healthy living for 30 years. He is also on t

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