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Pharmacy worker adding pills to inventory; Pharmacy Benefit Managers (PBMs) concept

Pharmacy Benefit Managers (PBMs): Key Players in Connecting Patients to Treatment

Recent conversations about the Inflation Reduction Act (IRA) and drug costs often focus on the IRA’s new authorizations to Health and Human Services to negotiate drug prices. In the private sector, parties have long had the ability to negotiate prices.

Enter pharmacy benefit managers (PBMs). PBMs serve as intermediaries in the prescription drug distribution chain. They negotiate formularies and drug prices on behalf of health insurers. PBMs also connect with pharmacies and pharmaceutical wholesalers as part of this effort.

With so many connections across the pharma distribution chain, pharmacy benefit managers are well-placed to improve the connection between rare disease patients and the treatments they need. Yet “certain PBMs’ business practices may not be consistent with public policy goals,” write Elizabeth Seeley and Aaron S. Kesselheim at The Commonwealth Fund. When PBMs connect with other payers, pharma companies, and providers through the Hub, these parties can work together to align PBMs’ efforts with other patient-directed goals.

Pharmacy Benefit Managers’ Impact on Prescription Drug Costs and Access

Pharmacy benefit managers build connections in the distribution of prescription drugs in several ways:

  • PBMs negotiate with drug manufacturers for formulary placement and rebate amounts.
  • PBMs share manufacturer rebates with insurance plans and manage drug benefits under the plan, receiving administrative fees in exchange for these efforts.
  • PBMs contract directly with pharmacies to dispense medications and to pass along drug costs and dispensing fees from insurers.

By negotiating formularies and rebates, PBMs can work to reduce the cost of prescription drugs for the insurers they represent. When PBMs pass rebates along to insurers, insurance plans can in turn reduce premiums and out-of-pocket costs for patients.

As pharmacy benefit managers’ role and influence increases, so do considerations about their effect on the drug distribution system and on overall drug pricing.

Seeley and Kesselheim note that the Centers for Medicaid and Medicare Services (CMS) found that PBMs’ formulary negotiation practices have lowered overall prescription drug costs in recent years. Relatively little information exists about PBMs’ internal financial practices, writes Cole Werble, cofounder of Prevision Policy LLC. A Pew study estimated that 78 to 91 percent of all rebates were passed through PBMs to health plans in the previous decade.

In an article in Health Affairs, Stacie B. Dusetzina, Juliette Cubanski, Diane Rowland and Scott Ramsey suggest that regulating patients’ out-of-pocket costs through greater attention to value in cost-sharing and coverage could help reduce costs. Such plans could include greater scrutiny into how PBMs manage rebates and administrative fees. Others, including Seeley and Kesselheim, remain skeptical that such methods will effectively change PBMs’ effects on costs.

Pharmacist explaining medication to patient; Pharmacy Benefit Managers (PBMs) concept

Including PBMs in the Patient-Treatment Connection

Currently, PBMs set drug prices for millions of U.S. residents with health insurance. Anne Cassity and Matthew Magner of the National Community Pharmacy Association (NCPA) note that when a patient has health insurance, it’s the PBM or the insurance plan — not the pharmacy — that sets the price of a prescription drug.

Over 266 million U.S. residents’ drug costs are determined by a PBM, and just three pharmacy benefit managers control 89 percent of that market: Express Scripts, CVS Caremark and OptumRx. These three PBMs set prices for 238 million insured patients.

With PBMs wielding so much influence in pharmaceutical distribution, drug companies, insurers and pharmacies must learn to work with these organizations.

Fortunately, connecting pharmacy benefit managers to the process of funding and filling prescriptions for orphan drugs offers benefits for all concerned.

PBMs gain a greater understanding of the parties they serve and more information on which to make better formulary and rebate decisions. Health insurers benefit from increased transparency in PBM communications, allowing insurers to see the value their pharmacy benefit managers provide and to distribute savings to insurance customers accordingly. Likewise, pharmacies and wholesalers better understand their relationships with PBMs and are better equipped to explain prices and their own policies to patients and providers. The Hub provides ways to strengthen these knowledge transfer relationships to provide actionable insights.

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