- Pharmacy benefit managers serve as the middlemen between drug companies and insurers.
- They negotiate discounts with drug makers and pass the cost savings on to insurers.
- These companies make money by up-charging the drugs or keeping some of the rebates.
- This sector of the industry is highly competitive and is characterized by consolidation.
What does a pharmacy benefit manager do?
Key Takeaways
- Pharmacy benefit managers serve as the middlemen between drug companies and insurers.
- They negotiate discounts with drug makers and pass the cost savings on to insurers.
- These companies make money by up-charging the drugs or keeping some of the rebates.
- This sector of the industry is highly competitive and is characterized by consolidation.
How do pharmacy benefit managers affect you?
The top three PBMs by market share are:
- CVS Caremark, which manages 30% of the market;
- Express Scripts, which manages 23% of the market; and
- Optum Rx*, which manages 23% of the market.
Who is the largest pharmacy benefit manager?
In 2020, the top pharmacy benefit managers included CVS Health, Express Scripts, and OptumRx, to name a few. CVS Health had the largest share of the pharmacy benefit manager market in 2020. In total CVS Health held 32 percent of the market at that time. Pharmacy benefit managers are an important part of the prescription drug supply chain.
What is pharmacy benefit management (PBM)?
The term pharmacy benefit management (PBM) industry refers to a group of companies that serve as the middlemen between insurance companies, pharmacies, and drug manufacturers. PBMs are responsible for securing lower drug costs for insurers and insurance companies. They accomplish this by negotiating with pharmacies and drug manufacturers.
What Is the Pharmacy Benefit Management (PBM) Industry?
What is PBM insurance?
Why do insurance companies use PBMs?
What are PBMs?
See more
About this website
What does a pharmacy benefit manager do?
What are pharmacy benefit managers? Pharmacy benefit managers, or PBMs, are companies that manage prescription drug benefits on behalf of health insurers, Medicare Part D drug plans, large employers, and other payers.
What is an example of a pharmacy benefit manager?
Example of PBMs: CVS/caremark According to the CVS/caremark website: "Whether plan members access their prescriptions by mail or in one of our national network's more than 68,000 retail pharmacies, we provide the service and support needed to make sure the process goes smoothly.
What is the difference between an insurance company and a pharmacy benefit manager?
The term pharmacy benefit management (PBM) industry refers to a group of companies that serve as the middlemen between insurance companies, pharmacies, and drug manufacturers. PBMs are responsible for securing lower drug costs for insurers and insurance companies.
How do pharmacy benefit managers make money?
In general terms, pharmacy benefit managers have three revenue sources: fees from the supply chain, rebates from manufacturers, and pharmacy “spreads” — the difference between what they pay for drugs from a pharmacy and what they get paid by the insurer.
Is Express Scripts a PBM?
Express Scripts will become the new Pharmacy Benefits Manager (PBM) on June 1, 2022. Until then, Optum will continue to operate as your PBM.
Is GoodRx a PBM?
Essentially, GoodRx is a PBM-backed program that passes a portion of rebates and network discounts off list directly to patients at the point of sale. For a patient with insurance, benefit design and network rates can differ among PBMs.
What are the three biggest PBM companies?
Three Major Players Control 80% of Total PBM Market Share by Total Adjusted Claims. CVS Caremark leads in PBM market share, representing 34% of total adjusted claims in 2021, followed by Express Scripts (25%), and OptumRx (21%). Together, these three PBMs control about 80% of the total PBM market share.
How many pharmacy benefit managers are there?
Today, there are 66 PBM companies, with the three largest – Express Scripts (an independent publicly-traded company), CVS Caremark (the pharmacy service segment of CVS Health and a subsidiary of the CVS drugstore chain), and OptumRx (the pharmacy service segment of UnitedHealth Group Insurance) – controlling ...
What is the largest PBM?
PBMs ranked by market share: CVS Caremark is No. 1CVS Caremark: 34 percent.Express Scripts: 24 percent.OptumRx (UnitedHealth): 21 percent.Humana Pharmacy Solutions: 8 percent.Prime Therapeutics: 6 percent.MedImpact Healthcare Systems: 5 percent.All other PBMs: 3 percent.
How do I get PBM experience?
Completing a managed care residency may be the best way to start a career in PBM pharmacy without prior work experience. Network through professional pharmacy organizations. Remember that landing your first PBM job is often the hardest.
How do PBMs generate revenue?
Altogether, PBMs generate more than $315 billion annually in revenue for themselves and their shareholders by adding their cost of doing business to the end cost of the prescription paid by insurance plans, taxpayer dollars and patient copays at the pharmacy counter. PBMs work with drug makers to develop the formulary.
What is a DIR fee?
What are DIR fees? DIR fees are the result of a loophole in Medicare regulations. Often more than half a year after a pharmacy fills a Medicare prescription, payers are taking back money paid to pharmacies. Payers are claiming they are taking back money due to a pharmacy's performance on so-called quality measures.
Best Pharmacy Benefit Management (PBM) Companies Q1 2022 | List of Top ...
List of the top 11 Pharmacy Benefit Management (PBM) Companies in Shortlister as of June 2022, presented in the order they appear in the full Vendor Listing tab.
Pharmacy benefit managers, explained - Advisory
Pharmacy benefit managers (PBMs) have gained national attention as regulators have tried to address rising prescription drug prices. But how exactly do these companies fit into the drug supply chain? Advisory Board's Gina Lohr and José Vasquez break down everything you need to know about PBMs.
PBM 101: A Refresher on The Role of Pharmacy Management in Workers’ Comp
There are more than 1,200 bills related to workers’ comp that are up for discussion in various states. Obviously not all of those will be adopted. but the regulatory component of a PBM is extremely important and we stay very close to that to ensure we’re providing our customers an up-to-date, compliant program.
What is a pharmacy benefit manager?
Providers which use such pharmacy benefit managers include commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Program, and state government employee plans. PBMs are designed to aggregate the collective buying power of enrollees through their client health plans, enabling plan sponsors and individuals to obtain lower prices for their prescription drugs. PBMs negotiate price discounts from retail pharmacies, rebates from pharmaceutical manufacturers, and mail-service pharmacies which home-deliver prescriptions without consulting face-to-face with a pharmacist.
How do pharmacy benefit management companies make money?
Pharmacy benefit management companies can make revenue in several ways. First, they collect administrative and service fees from the original insurance plan. They can also collect rebates from the manufacturer. Traditional PBMs do not disclose the negotiated net price of the prescription drugs, allowing them to resell drugs at a public list price (also known as a sticker price) which is higher than the net price they negotiate with the manufacturer. This practice is known as "spread pricing". Savings are generally considered trade secrets. Pharmacies and insurance companies are often prohibited by the PBM from discussing costs and reimbursements. This leads to lack of transparency.
How many lawsuits were filed against PBMs in 2015?
In 2015, there were seven lawsuits against PBMs involving fraud, deception, or antitrust claims. State legislatures have been using "transparency", "fiduciary", and "disclosure" provisions to improve the business practices of PBMs.
When did Diversified Pharmaceutical Services become a major force?
By the late 1980s, PBMs had become a major force "as health care and prescription costs were escalating". Diversified Pharmaceutical Services was one of the earliest examples of a PBM which came from within a national health maintenance organization United HealthCare (now United HealthGroup). After SmithKline Beecham acquired DBS in 1994, Diversified played a pivotal role in its Healthcare Service division and by 1999 UnitedHealth Group accounted for 44% of Diversified Pharmaceutical Services's total membership. Express Scripts acquired Diversified in April 1999 and consolidated itself as a leading PBM for managed care organizations.
What is formulary in healthcare?
This happens by constructing a "formulary" or list of specific drugs that will be covered by the healthcare plan. The formulary is usually divided into several "tiers" of preference, with low tiers being assigned a higher copay to incentivize consumers to buy drugs on a preferred tier.
What association represents pharmacy benefit managers?
Many Pharmacy benefit managers are represented by the trade association the Pharmaceutical Care Management Association .
When was PBM invented?
In 1968, the first PBM was founded when Pharmaceutical Card System Inc. (PCS, later AdvancePCS) invented the plastic benefit card. By the "1970s, [they] serve [d] as fiscal intermediaries by adjudicating prescription drug claims by paper and then, in the 1980s, electronically".
What is a pharmacy benefit manager?
A pharmacy benefit manager is essentially a middleman service between the world's drugmakers and U.S. end payers, but healthcare investors need to understand far more about the unusual PBM industry. A pharmacy benefit manager (PBM) is a third-party administrator of prescription-drug programs for end payers, such as private insurers, ...
What is PBM in pharmacy?
Updated: Jul 21, 2017 at 12:05PM. A pharmacy benefit manager (PBM) is a third-party administrator of prescription-drug programs for end payers, such as private insurers, and Medicare Part D plans.
What is OptumRx?
The next largest PBM, OptumRx, is a subsidiary of UnitedHealth Group, America's largest healthcare provider. Pharmacy benefit managers point to expert understanding of prescription-drug markets as a source of value for their customers. However, it's sheer size that gives them power to negotiate discounts and rebates from drugmakers.
What is a PBM in healthcare?
Ashley Hall. on June 02, 2020. A pharmacy benefit manager (PBM) is a company that administers, or handles, the drug benefit program for your employer or health plan.
What are the responsibilities of a PBM?
It takes a lot of logistical work to get your medications to you. For expedience, a PBM must fulfill several responsibilities including the following : 1 negotiate rebates 2 operate mail order 3 oversee patient compliance 4 perform drug utilization reviews 5 process claims 6 maintain formularies 7 manage distribution among a network of pharmacies 8 provide specialty pharmacy services
How many pharmacies does CVS have?
CVS Health is a huge company, which consists of 7,800 pharmacies and 1,000 mini-clinics as well as PBMs. Isn't it ironic that a pharmacy and clinic, which is supposed to keep people healthy, sells tobacco products, too?
Can mail order medications be discounted?
Because these companies can buy medications in large quantities directly from the drug companies, they are able to offer you discounts in mail order medications .
What are pharmacy benefit managers?
Pharmacy benefit managers, or PBMs, are companies that manage prescription drug benefits on behalf of health insurers, Medicare Part D drug plans, large employers, and other payers. By negotiating with drug manufacturers and pharmacies to control drug spending, PBMs have a significant behind-the-scenes impact in determining total drug costs for insurers, shaping patients’ access to medications, and determining how much pharmacies are paid. 1 PBMs have faced growing scrutiny about their role in rising prescription drug costs and spending.
What role do PBMs play in how much we spend on prescription drugs?
PBMs operate in the middle of the distribution chain for prescription drugs. That’s because they:
What reforms have been proposed to regulate PBMs?
Policymakers have considered three principal reforms to regulate PBMS:
Why do PBMs get rebates?
Because they often receive rebates that are calculated as a percentage of the manufacturer’s list price, PBMs receive a larger rebate for expensive drugs than they do for ones that may provide better value at lower cost.
How do PBMs work?
PBMs operate in the middle of the distribution chain for prescription drugs. That’s because they: 1 develop and maintain lists, or formularies, of covered medications on behalf of health insurers, which influence which drugs individuals use and determine out-of-pocket costs 2 use their purchasing power to negotiate rebates and discounts from drug manufacturers 3 contract directly with individual pharmacies to reimburse for drugs dispensed to beneficiaries. 2
Why do PBMs need to reorient their business model?
Some experts think that PBMs also need to reorient their business model away from securing rebates and more toward improving value in pharmaceutical spending. For example, health plans and PBMs could do more to support physicians in prescribing the most cost-effective medications on their patient’s formularies.
Should PBMs keep rebates?
There is a lot of debate over whether PBMs should be able to keep the rebates they receive from drug manufacturers , which generally aren’t publicly disclosed. Some believe PBMs should be compelled to “pass through” all or a larger portion of these savings to health insurers and other payers.
Why is it important to have a pharmacy benefit plan?
Having an effective pharmacy benefit strategy, and selecting the right PBM to meet an employer’s needs, is critical to ensuring the success of a benefits plan, optimizing spend, and protecting the well-being of employees.
What is a PBM in pharmacy?
What is a Pharmacy Benefit Manager (PBM) and how Does a PBM Impact the Pharmacy Benefits Ecosystem? Pharmacy Benefits Managers, also referred to as PBMs, are, in essence, the intermediaries of almost every aspect of the pharmacy benefits marketplace. Many people assume that pharmacy benefits come directly from the health insurance provider when, ...
What exactly do PBMs do?
PBMs have two main objectives: to curate pharmacy prescription benefits plan options; and to help patients achieve better health outcomes through greater access to appropriate medications.
How do PBMs work with Pharmaceutical Manufacturers?
The relationship between PBMs and pharmaceutical manufacturers is complicated. There are a number of financially-driven challenges that make interactions between drug companies and PBMs difficult to navigate and understand.
What does a PBM do?
PBMs negotiate with pharmaceutical companies to determine the level of rebates the company will offer for certain drugs — rebates are paid to the PBM. Depending on the contract between the PBM and employer, or plan sponsor, the PBM will pass all, some, or none of the rebate to the employer or plan sponsor.
Why are PBMs important?
It’s not always about money — PBMs play an important safety role within prescription benefits plans, too. Drug Utilization Review is a life-saving program that calls for the review of a drug to determine effectiveness, potential dangers, potential drug interactions, and mitigate other safety concerns. Since PBMs oversee their own pharmacy networks, they have access to a patient’s prescription history and can alert patients or physicians to potential negative drug interactions that could occur by mixing different prescriptions.
How long does a PBM contract last?
When an employer signs a contract with a PBM to design and maintain a prescription benefits plan, they typically contract for a three-year relationship. During the initial discovery phase, both parties work together, and in some cases with brokers and industry experts, to build their ideal pharmacy benefit plan by choosing from different deductibles, co-payments, co-insurances, and clinical programs.
What is PBM insurance?
Pharmacy Benefit Management (PBM) 101. Many employers typically use prescription drugs covered through their insurers. But new options for self-insurance let businesses hire pharmacy benefit managers (PBMs) independently from their insurance carriers to reduce their health benefit costs. Self-insured plans, where the business assumes more risks in ...
How much money do PBMs save?
PBMs are projected to save employers and consumers as much as 30%, or $654 billion, on drug benefit costs over the next decade, according to the Pharmaceutical Care Management Association . However, PBMs are not always transparent.
How long can a PBM hold rebates?
Instead of worrying about a PBM holding their rebate dollars for 180 days, our clients can put that money directly in their bank accounts. If you need assistance partnering with the right PBM, give us a call at (800) 383-8283 to set up an appointment with one of our consultants .
What is the drug price standard?
The drug pricing standard, which forms the basis for discount prices, is known as Average Wholesale Price (AWP). However, AWP is virtually never what is actually paid. It is an inflated price that purchasers of PBM services negotiate and rely on far too often.
Learning the basics of Pharmacy Benefit Management is key for success. Here are six important concepts to understand
The workers' compensation industry can be complex, from keeping up with regulatory changes to understanding the roles and responsibilities of various key stakeholders.
1. What is Pharmacy Benefit Management (PBM)?
Pharmacy Benefit Management (PBM) is a third party administrator of prescription drug programs that is primarily responsible for processing and paying prescription drug claims. Pharmacy Benefit Management companies are also responsible for developing and maintaining program formularies, contracting and negotiating discounts with pharmacies.
3. How Can a PBM Help Navigate a Difficult Claim?
As addressed above, a PBM can provide greater insight into a claim. When a PBM is able to utilize technology such as predictive analytics, it can provide an adjuster with insights into potentially problematic claims before they become an issue.
4. What are Some Issues that Pharmacy Benefit Management Helps Insurers Address?
The opioid epidemic has affected every part of the U.S., including workers’ compensation industry. The most recent statistic from the National Institute of Drug Abuse shows just how prevalent this issue has become: drug overdose deaths in the United States rose to 72,000 in 2017. Of those overdoses, nearly 49,000 were associated with opioids.
5. How do Formularies Work with Pharmacy Benefit Management?
Drug formularies are lists of approved drugs. In workers’ compensation, these are used to regulate what is most appropriate for an injured worker to receive. Formularies are created on the state level by an independent board of physicians or from an established organization.
6. What are Some Important Terms to Know in Pharmacy Benefit Management?
Adjudication is the processing of a claim. Successful adjudication happens when a claim is processed through the proper benefit plan and finishes with the client's expected result.
Why do Pharmacy Benefit Managers Exist?
Because health insurers have inserted themselves so deep into American healthcare, they struggle to perform basic functions. Something so basic as prescription drug coverage. Rather than simplify mercurial eligibility requirements wholly designed to limit their need to spend money, insurers sell off this function to a PBM.
Why are PBMs so Bad?
Pharmacy benefit managers are the ultimate middlemen. They take advantage of a complex system and add to the bloat. And this all goes on behind closed doors. Forget about getting an itemized statement from your dictatorial PBM.
What Is the Pharmacy Benefit Management (PBM) Industry?
The term pharmacy benefit management (PBM) industry refers to a group of companies that serve as the middlemen between insurance companies, pharmacies, and drug manufacturers. PBMs are responsible for securing lower drug costs for insurers and insurance companies. They accomplish this by negotiating with pharmacies and drug manufacturers. The discounts are then passed onto insurance companies. Profits are generated through the slight up-charging of drugs or retaining portions of rebates .
What is PBM insurance?
Pharmacy benefit management (PBM) companies serve as the middlemen between insurance companies, pharmacies, and manufacturers securing lower drug costs for insurers and insurance companies. PBMs do this through negotiating with pharmacies and drug manufacturers to secure discounts on drug prices, then pass these discounts along to insurance ...
Why do insurance companies use PBMs?
Insurance companies rely on PBMs to manage costs, and PBMs leverage this backing to negotiate with drug manufacturers by demanding discounts on drugs in exchange for putting the manufacturer’s drugs in front of millions of customers. Furthermore, PBMs negotiate contracts with pharmacies to create networks of retail pharmacies for drug distribution.
What are PBMs?
PBMs exploit several revenue streams. They charge service fees for negotiating with pharmacies, insurance companies, and drug manufacturers, and for processing prescriptions and operating mail-order pharmacies .
Understanding The Pharmacy Benefit Management (PBM) Industry
- Just like other subsectors of the economy, insurance is a multilayered business with many players serving a variety of interests and purposes. This means that insurance companies aren't the only entities that operate in this industry. In fact, it also includes reinsurers, underwriters, and pharma…
Special Considerations
- The cost of drugs has exploded over the years, leading insurance companies to rely heavily on PBMs to control and reduce their liabilities. As such, the industry has seen increased competition among PBMs as well as consolidation. Mergers and acquisitions(M&A) allow PBMs to increase in size and boost their negotiation power. In addition to M&A deals among PBMs, there has also be…
Criticism of The PBM Industry
- As the sheer nature of the business likely implies, PBMs are common targets of lawsuits and government scrutiny.6 As third-party negotiators, many of their business practices are opaque, so PBMs haven’t always disclosed rebates, discounts, itemized billing statements, or the percentage of savings passed on to insurers. State legislatures have been pushing for greater transparency …
Overview
In the United States, a pharmacy benefit manager (PBM) is a third-party administrator of prescription drug programs for commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Program, and state government employee plans. According to the American Pharmacists Association, "PBMs are primarily responsible for developing and maintaining the formulary, contracting with pharmacies, negotiating discounts a…
Business model
In the United States, health insurance providers often hire an outside company to handle price negotiations, insurance claims, and distribution of prescription drugs. Providers which use such pharmacy benefit managers include commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Program, and state government employee plans. PBMs are designed to aggregate the collective buying power of enrollees throug…
History
In 1968, the first PBM was founded when Pharmaceutical Card System Inc. (PCS, later AdvancePCS) invented the plastic benefit card. By the "1970s, [they] serve[d] as fiscal intermediaries by adjudicating prescription drug claims by paper and then, in the 1980s, electronically".
By the late 1980s, PBMs had become a major force "as health care and prescription costs were …
Market and competition
As of 2004, the Federal Trade Commission found PBMs operated in a marketplace with "vigorous competition". And as of 2013, in the United States, a majority of the large managed prescription drug benefit expenditures were conducted by about 60 PBMs. Few PBMs are independently owned and operated. PBM's operate inside of integrated healthcare systems (e.g., Kaiser Permanente or Veterans Health Administration), as part of retail pharmacies, major chain drug st…
Advocacy and lobbying
Many Pharmacy benefit managers are represented by the trade association the Pharmaceutical Care Management Association.
PBMs have been strong proponents in the creation of a U.S. Food and Drug Administration pathway to approve biosimilar versions of expensive specialty drugs which treat conditions like Alzheimer's, rheumatoid arthritis and multiple sclerosis. PBM's support so-called biosimilar legisl…
Controversies and litigation
In 1998, PBMs were under investigation by Assistant U.S. Attorney James Sheehan of the federal Justice Department and their effectiveness in reducing prescription costs and saving clients money, were questioned.
In 2004, litigation added to the uncertainty about PBM practices. In 2015, there were seven lawsuits against PBMs involving fraud, deception, or antitrust claims.
See also
• Online pharmacy
• Preferred pharmacy network
External links
• Pharmacy Benefit Management Institute list of PBM companies