A pharmacy benefits manager (PBM) is a company that administers or manages your employer’s or health plan’s medication benefit program.
PBMs are responsible for processing and paying prescription drug claims, as well as developing and updating your health plan’s drug formulary.
Because these organizations may purchase prescriptions in bulk straight from the pharmaceutical companies, they can offer you discounts on mail-order medications.
PBM Is a Middleman
Probably the aptest metaphor for a PBM is that of a middleman. A middleman that assists your employer in obtaining medical care and prescription prescriptions for you.
Logistics are involved in delivering your drugs to you. A PBM must fulfill various obligations to ensure efficiency, including the following:
- bargain for rebates
- conduct mail-order business
- surveillance of patient compliance
- conduct drug use audits
- adjudicate claims
- preserve formularies
- control distribution across a pharmacy network
- give services in speciality pharmacy
Employers, health plans, labor unions, and other organizations hire PBMs to interact with pharmaceutical makers and process prescription-related claims. In a nutshell, PBMs serve as the link between employers, members, wholesalers, pharmacies, and pharmaceutical firms, facilitating the best possible health outcomes at the lowest possible cost. Therefore, having an efficient pharmacy benefit strategy in place and selecting the appropriate PBM to match an employer’s objectives is crucial for assuring the success of a benefits plan, optimizing cost, and preserving employees’ well-being.
What are PBMs used for?
PBMs provide two primary functions: curating pharmacy prescription benefit plan options and assisting patients in achieving better health outcomes by increasing access to appropriate drugs.
PBMs accomplish this by collaborating with pharmaceutical makers, wholesalers, pharmacies, and plan sponsors.
PBMs negotiate pricing with a vast network of retail or mail-order pharmacies and provide patients and employers with greater access to pharmaceuticals at competitive prices across numerous retail chains.
PBMs offer comprehensive clinical services, such as quantity editing, step treatment, and prior authorizations to assist benefits plan administrators in ensuring appropriate pharmaceutical use, safety precautions, and cost savings.
Employers frequently use PBMs as counselors, providing guidance and suggestions on various plan types, therapeutic initiatives, and more.
Expand Medication Access
By negotiating directly with pharmaceutical makers or wholesalers, PBMs improve patients’ access to pharmaceuticals. PBMs negotiate volume reductions from Wholesale Acquisition Cost (WAC) to pass on to their clients. Additionally, they negotiate fees depending on compliance initiatives.
PBMs help contains rising prescription expenses, guarantee that medications are administered correctly, and provide the most remarkable patient’s health and fitness. In addition, PBMs can offer patients and employers greater access to pharmaceuticals by building a vast network of retail or mail pharmacies.
What is the relationship between PBMs and Pharmaceutical Manufacturers?
PBMs and pharmaceutical makers have a delicate relationship. Numerous financial constraints make relationships between pharmaceutical firms and PBMs challenging to handle and comprehend.
PBMs act as a mediator between pharmaceutical companies and patients, analyzing the cost of a prescription and implementing programs to assist patients in obtaining medications and using the most effective therapies.
What role do pharmacy benefit managers have in determining how much we spend on prescription drugs?
PBMs sits in the center of the prescription drug distribution chain. This is because they:
- Develop and maintain lists, or formularies, of covered pharmaceuticals on behalf of health insurers, impacting which prescriptions patients use and how much they pay out of pocket.
- Utilize their purchasing power to wrangle rebates and discounts from pharmaceutical manufacturers
- dealing directly with individual pharmacies to compensate beneficiaries for dispensing medications.
According to the federal Centers for Medicare and Medicaid Services. PBMs’ capacity to negotiate higher rebates from manufacturers has lowered prescription prices and slowed the growth of drug spending over the previous three years. However, PBMs may have an incentive to promote expensive pharmaceuticals over more cost-effective ones. Because PBMs frequently earn rebates based on a percentage of the manufacturer’s list price. They receive a higher rebate for costlier pharmaceuticals than for drugs that may give superior value at a lower cost. As a result, those who have a high-deductible plan or copays based on the list price may face increased out-of-pocket payments.
How Do PBMs Earn Their Keep?
PBMs earn around $315 billion in revenue each year from five revenue streams: rebate sharing, pharmacy spread, PBM-owned pharmacies, administrative fees, and DIR fees.
Sharing of Rebates
Insurance companies pay PBMs to manage drug costs and are compensated by manufacturers through rebates. Frequently, PBMs retain a portion of the rebate. Additionally, PBMs will negotiate pricing with manufacturers, who will then reimburse the PBM for the PBM’s preferential placement on the formulary of a plan.
Pharmacies Owned by PBMs
PBMs, such as Spectrum Pharmacy Solutions, own retail and mail-order pharmacies. As a result, they profit when patients are compelled to use mail orders and make all purchases through them.
Fees for Administration
PBMs impose administrative fees for the electronic processing of each claim. These fees can range from $1.25 to $3.50 per script, in addition to the $0.10 to $0.15 per claim processing fee.
DIR Fees “Direct and indirect remuneration” fees are imposed on pharmacists following an unpredictable patient sale. These fees may include “pay-to-play” fees for network membership, reimbursement reconciliations periodically, or non-compliance with quality measures.