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The Role of Pharmacy Benefit Managers


Does your health benefit plan have a pharmacy benefit manager (PBM)? If so, it’s important you understand how a PBM affects your and your employees’ access to prescription drugs, as well as controlling your out-of-pocket costs.


PBMs manage prescription drug benefits for health insurers in several ways:

• Working directly with the drug manufacturers to negotiate rebates and lower costs.

• Determining which drugs members can purchase without having to incur additional out-of-pocket costs; and maintaining lists, or formularies, of covered medications.

• Contracting directly with individual pharmacies for lower costs.


Representatives for the federal Centers for Medicare and Medicaid Services say that in the last three years PBMs have helped lower drug prices and slow the growth of drug spending by negotiating rebates directly with the manufacturers. While some PBMs pass along the rebates to the insured members, some don’t and some may even recommend higher-priced drugs in order to earn larger rebates. Employees with high-deductible plans must pay high copays based on the drug’s list price.


Drug manufacturers argue that the rebates PBMs demand force them to raise prices. The Commonwealth Fund, a private company devoted to promoting the common good, reports that manufacturer rebates to PBMs increased from $39.7 billion in 2012 to $89.5 billion in 2016, which partially offset price increases. PBMs say that they are passing along a larger share of the rebates to insurers.


Critics suggest that PBMs start receiving greater scrutiny and suggest requiring PCMs to:

• Be more transparent about rebates

• Discontinue spread pricing, to ensure insured members and employers are not overpaying PBMs for prescription drugs.

• Require PBMs to give 90 percent of the rebates to payers or to patients.

• Reorient their business model away from securing rebates and more toward improving value in pharmaceutical spending.

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