PBMs, or pharmacy benefit managers, administer prescription medication benefits on behalf of health insurers, Medicare Part D drug plans, significant employers, and other payers, such as Medicaid and Medicare Advantage plans. PBMs influence insurers’ total drug prices, patients’ access to prescriptions, and how much pharmacies are paid through negotiating with drug manufacturers and pharmacies to reduce drug spending. A growing number of people are questioning the role that PBMs play in driving up the price of prescription drugs.
What impact does PBMs have on our prescription drug costs?
In the distribution chain for prescription pharmaceuticals, PBMs sit amid the process. Because of this:
- for health insurers, generate and manage lists of covered prescriptions (or formularies) that have an impact on prescription drug utilization, and the amount patients are responsible for paying out-of-pocket
- Negotiate discounts and rebates from drug makers using their purchasing power
Drug costs have dropped, and drug spending growth has slowed due to a PBM’s capacity to negotiate more significant rebates from manufacturers, according to federal Centers for Medicare and Medicaid Services. In addition, PBMs may promote expensive pharmaceuticals over more cost-effective ones since they have an incentive to do so. To make up for the decreased value of cheaper medicines, PBMs often receive rebates based on the manufacturer’s list price, which means that expensive drugs generate a higher refund to PBMs. Their out-of-pocket payments could be higher for those with high deductibles or coinsurance based on the drug’s list price.
PBMs maintain close ties with three essential parties in the pharmaceutical supply chain: manufacturers, wholesalers, and distributors.
The PBM’s job is to get rebates and discounts from the drug manufacturer on behalf of the patient. PBMs will put particular pharmaceuticals on formularies in exchange for rebates, ensuring that a drug manufacturer gets business.
Payer-sponsored pharmacy (PDP) and pharmacy benefit manager (PBM) (i.e., the medications for which plan beneficiaries may receive coverage.) In return, the PBM gets money from the payer to cover administrative costs, the cost of the medicine itself, and the cost of dispensing it.
Pharmaceutical benefit managers (PBMs) and pharmacies: A PBM may contract with a pharmacy to provide pharmaceuticals directly to patients.
PBMs play a critical role in the pharmaceutical supply chain, yet most people have no idea what they are or how they work. Health care providers’ drug formularies are managed by formulary managers, who negotiate rebates and discounts from manufacturers.
Keep track of drug formulas and dosages.
Managing and maintaining a healthcare payer’s formulary list is a primary responsibility of a PBM.
There is a list of preferred prescription medications called a drug formulary maintained by a particular health plan. It is vital to understand healthcare advantages and what type of care a patient can receive by reviewing the formulary.
To avoid paying the total cost of a prescription drug not on a health plan’s formulary list. A patient’s provider must choose another drug on the plan’s formulary.
The Fund believes that assessing patient access to a drug and its utilization is part of setting that drug formulary. PBMs can, for example, develop drug adherence programs and implement utilization control measures such as prior authorization or step treatment.
To access a medication that needs prior authorization. A patient and her doctor must get precise instructions from a payer board comprising providers and other stakeholders. As a part of step therapy, patients must initially try lower-cost medicines before moving up the prescription formulary.
As a result of the PBM’s role in formulary management. It has taken on additional responsibilities, such as negotiating drug costs and managing rebates from prescription drug makers.
The Price of Drugs, the Management of Rebates
PBMs must then negotiate a price with a prescription medicine manufacturer as the next step. The manufacturer establishes the list price of a drug known as a raw price. Even while manufacturers claim that their pharmaceuticals have a list price, that is rarely the price a pharmacy benefits manager (PBM) pays for the medication.
pharmaceutical industries well-recognized PBMs for developing medication formularies. Manufacturers want their high-priced pharmaceuticals on preferred drug formularies; therefore, typically grant rebates to PBMs, which means PBMs have to negotiate lower payments for drugs than their list price.
As a result, the PBM is reimbursed by its payer partners and pays a medicine dispensing and administration charge to pharmacies.
Some parties, however, believe that the rebates and price negotiations processes are defective.