Full Infographic. Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website. PBMs originated more than two decades ago Today, health care plans hire PBMs to secure lower costs for prescription drugs, passing the savings directly to patients.
PBMs encourage the use of generics and more affordable brand medications. PBMs negotiate rebates from drug manufacturers and discounts from drugstores.
PBMs manage high-cost specialty medications. PBMs reduce waste and improve adherence. More than 9 in 10 employers are satisfied with their PBM. PBMs offer extensive clinical programs including quantity edits, step therapy, and prior authorizations, to help benefits plan administrators ensure appropriate medication usage, safety precautions, and savings opportunities.
PBMs often serve as advisors for employers by providing advice and recommendations on different plan designs, clinical programs, and more. Learn how you can reduce your pharmacy benefits spend even further through competitive PBM procurement. They also negotiate payments based on adherence programs. PBMs mitigate rising prescription costs and ensure that drugs are administered effectively and achieve the best result for the health and wellness of the patient. By establishing a large network of retail or mail pharmacies, PBMs are able to offer patients and employers greater access to medications across multiple retail chains.
The PBM is in the middle, connected between the manufacturer and the employer, and is being pulled in both directions — with the goal of getting both parties a fair deal and offering solutions to minimize prescription benefit costs. The relationship between PBMs and pharmaceutical manufacturers is complicated.
There are a number of financially-driven challenges that make interactions between drug companies and PBMs difficult to navigate and understand. As an intermediary between pharmaceutical companies and patients, PBMs are responsible for determining the affordability of a drug and putting programs in place to help patients access medications and use the most effective treatments.
These programs include:. PBMs negotiate with pharmaceutical companies to determine the level of rebates the company will offer for certain drugs — rebates are paid to the PBM. Depending on the contract between the PBM and employer, or plan sponsor, the PBM will pass all, some, or none of the rebate to the employer or plan sponsor. A formulary is a list of drugs, both branded and generic, that are covered within a certain plan. The list is determined by PBMs with the assistance of physicians and other clinical experts to include the drugs that will be most effective and affordable.
Ideally, a drug company wants to make sure their drugs are covered in order to reach the patients that need them. Step Therapy programs are a type of prior authorization that applies to both traditional and specialty drugs. Prior Authorization is a cost-savings feature that helps ensure the appropriate use of prescription drugs.
Prior Authorizations are designed to prevent improper prescribing or the improper use of certain drugs. The top three PBMs by market share are:. Daily Briefing is published by Advisory Board , a subsidiary of Optum. PBMs are responsible for processing approximately two-thirds of the 6 billion prescriptions written by U.
That's because private and public insurers hire PBMs to handle drug benefits for their health plans. As part of that, PBMs develop lists—or formularies—of the drugs covered by a health insurer and negotiate rebates and discounts for prescription drugs on behalf of them.
This means PBMs are involved in determining how much insurers pay manufacturers for a drug and how much consumers pay at the pharmacy counter. PBMs used to largely generate revenue through charging administrative or service fees within their contracts with private health plans. However, in recent years, they've sought a number of ways to diversify their revenue. One way is through government contracts, specifically Medicare Part D plan sponsors and Medicaid managed care programs.
In , PBMs managed pharmacy benefits for 38 million Medicaid managed care enrollees. Another source of revenue for PBMs, and one of the most controversial, are rebates from manufacturers. Manufacturers provide rebates to promote use of their drugs, and will offer them to achieve "preferred" formulary status or other benefits from the PBM. Manufacturers typically offer higher rebates for brand products in therapeutic classes with competing products, such as diabetes medications.
Therefore, PBMs can often negotiate and pass on significant savings to plan sponsors. But just how much revenue PBMs keep from these rebates has become a source of debate. PBMs have generally been passing on more of their rebates to sponsors in recent years and note that their reliance on rebates as a revenue source is decreasing. However, critics argue that the rebate model can inflate drug prices as health plans generally evaluate PBMs on these rebate guarantees rather than net drug spend.
As a result, PBMs may be incentivized to negotiate for higher rebates as opposed to lower costs. At the same time, drug manufacturers claim that the growing rebates they pay PBMs force them to raise list prices on drugs.
There are also concerns that PBMs, even as their rebate pass-through percentages have been increasing, have been getting fees from manufacturers that are not strictly called "rebates," but that still function as de-facto rebates. These fees can obscure plan sponsor's understanding of the actual rebates they are getting.
Additionally, in some cases, a PBM will charge insurers more for a drug than the PBM pays a pharmacy to dispense it and the PBM will keep the difference instead of passing on the full payment to pharmacies. This practice, which is called spread pricing, is expected in traditional plan contracts, but the extent of the spread taken is rarely transparent and therefore often a source of controversy.
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