A pharmacy benefits manager (PBM) is a company that administers or manages your employer’s or health plan’s medication benefit program. PBMs process and pay prescription drug claims and are responsible for developing and maintaining the drug formulary for your health plan.
Because these companies may purchase prescriptions in big quantities straight from drug manufacturers, they can give you mail-order medication discounts.
PBM Is an Intermediary
Probably the best way to conceptualise a PBM is as an intermediary. An intermediary who assists your company in procuring medical services and prescription prescriptions for you.
According to the song:
“A Pharmacy Benefit Manager, or PBM, is a company that provides programs and services to help enhance drug efficacy and control prescription costs by appropriately influencing the prescribing physicians’, pharmacists’, and members’ actions.”
The logistics required to deliver your drugs to you are extensive. For efficiency, a PBM must fulfil several obligations, including the ones listed below:
- negotiate rebates
- operate mail order
- monitor patient adherence
- Carry out drug usage reviews
- filing claims
- preserve formularies
- oversee distribution among a network of pharmacies
- supply specialised pharmacy services
- As you can see, PBMs facilitate your care through various duties.
- CVS/Caremark are examples of PBMs
- CVS/Caremark is one of the largest PBMs in the country (part of CVS Health).
According to the website for CVS/Caremark:
“Whether plan members get their medicines via mail or in one of the more than 68,000 retail pharmacies in our national network, we provide the necessary assistance and support to ensure a smooth experience.
“We collaborate with businesses, health insurance companies, the government, and other health benefit program sponsors to design and administer prescription coverage plans. This involves formulary management, arrangements for cheap prescription purchases, clinical services, and health care initiatives.”
How to locate the ideal pharmaceutical benefits manager for your firm
To administer your pharmacy benefits plan, there are dozens of PBMs and creative vendors to select from. However, it might be challenging to analyse the offers of different PBMs to choose a provider that meets the demands of your population and saves your business money. To obtain the most competitive PBM contract, it is essential to employ an innovative procurement marketplace that provides greater visibility into what PBMs offer. However, as a buyer, you must guarantee that your procurement marketplace is 100 per cent transparent and unaffiliated with PBMs or vendors. Only a transparent procurement marketplace can guarantee that you are receiving the greatest price on your PBM.
Understanding the Industry of Pharmacy Benefit Management (PBM)
Like other subsectors of the economy, insurance is a complex business with several participants representing diverse interests and objectives. This indicates that insurance firms are not the only entities operating in this sector. Also included are reinsurers, underwriters, and pharmacy benefit management organisations.
Insurers rely on PBMs to manage costs, making them the intermediary. In exchange for placing the manufacturer’s products in front of millions of clients, PBMs negotiate reductions with pharmaceutical companies on behalf of insurance companies. These companies also negotiate contracts with pharmacies to establish retail pharmacy distribution networks.
PBMs utilise multiple revenue streams. For example, they assess service costs for:
- Negotiation with pharmacies, insurance companies, and pharmaceutical firms
- The handling of prescription
- Management of mail-order pharmacies
Contracts with the major insurance providers can rapidly alter a PBM’s prospects. Granting it enormous negotiating leverage with medication producers and pharmacies. Therefore, it should not be surprising that competition is severe, with PBMs attempting to position themselves optimally for contract negotiations with insurance companies.
Since the cost of pharmaceuticals has skyrocketed over the years. Insurance companies largely rely on PBMs to reduce and control their obligations. As a result, the business has witnessed greater competition and consolidation among PBMs. Mergers and acquisitions (M&A) enable PBMs to grow in scale and negotiate more effectively.
In addition to mergers and acquisitions between PBMs, there has been consolidation between pharmacies and PBMs due to their inherent synergies. In 2015, Rite Aid acquired EnvisionRX, and CVS Caremark has had direct access to CVS’s retail pharmacy network for years.
PBMs are responsible for reimbursing pharmacies for distributing medications to patients. The pharmacy has no control over the sale of the medication, despite having already incurred expenses for stocking and dispensing it. The PBM determines the patient’s copayment and the number of reimbursement pharmacies will receive for each drug covered by the drug plan.
The PBMs establish in advance how much each drug covered by the plan should cost, which is the amount reimbursed to pharmacies other than their own. Frequently, the reimbursement rates are much below the cost of the medicine, forcing pharmacies to fill prescriptions at a loss.
No one knows how the cost of each covered prescription is set because PBMs are not regulated and are not obligated to provide their formulae. This information is a “trade secret” by PBMs, leaving pharmacists no alternative except to appeal the losses they incur to fill the prescription. Despite rules in New York State establishing extremely precise appeal procedures, the PBM frequently denies or ignores these challenges.