As the cost of prescription medication keeps rising, managing pharmacy benefits is becoming even more complicated for the organizations who offer them. Choosing the right pharmacy benefit manager (PBM) is critical. Here’s what you need to know about the role PBMs play in the pharmacy solutions system, how they work and what benefits they can offer insurers and patients.
What are PBMs?
A pharmacy benefit manager (PBM) is a third-party organization that manages prescription drug plan (PDP) benefits for a variety of health plan types. Usually, they’re responsible for processing claims, creating pharmacy networks, developing formularies, negotiating pricing and more. Their role can heavily influence medication cost, access and utilization (how medications are prescribed, used and delivered across a health plan).
How PBMs work and how they fit into the health care system
Unlike insurers, who manage broader medical benefits, PBMs only administer pharmacy benefits. They sit in the middle of the pharmacy benefits system, connecting and managing negotiations between insurers, pharmacies and drug manufacturers. Private insurers and self-funded insurers contract PBMs to manage prescription drug benefits, control drug spending and reduce administrative responsibilities.
What PBMs do: Benefits for employers
The administrative work PBMs provide extends across a range of pharmacy solution tasks. Working alongside manufacturers, insurers and pharmacies, PBMs:
- Manage the purchasing, reimbursement and dispensing of prescription drugs for employers and health plans
- Process and resolve member claims
- Create and maintain pharmacy networks (mainly retail, mail and specialty)
- Develop prescription drug formularies (lists of drugs preferred by the benefits plan) that influence what doctors prescribe
- Provide clinical and disease drug management programs and offerings to encourage correct usage and adherence
- Negotiate prescription drug pricing
Why do employers and health plans use PBMs?
Pharmacy benefit management keeps getting more complex, so choosing a skilled PBM is more important than ever. The right PBM will provide specialized market knowledge and administrative infrastructure that helps employers manage pharmacy benefits more effectively.
Lower costs for insurers and patients
PBMs do more than manage complex formularies. They use their expertise in drug trend management to negotiate lower drug prices with manufacturers and pharmacies.
Some PBM services, like pharmacy solutions offered by HealthPartners, integrate pharmacy and medical benefits. This approach can lead to even more prescription savings, allowing employers a powerful way to manage drug costs.
Higher levels of safety for members
PBMs play a key role in making prescription medication safer. They track how drugs are used, assess dangerous medication interactions and implement measures like prior authorization to curb overprescribing.
The importance of transparency in pharmacy benefit management
In recent years, conversations around regulatory loopholes in pharmacy benefit management have increased, and legislation has tightened PBM regulations in several states.
This is because lack of transparency in pricing (or how rebates are formed) has allowed some PBMs to profit from undisclosed revenue streams via spread pricing. With this practice, a PBM charges an employer a higher price for a drug than they paid the pharmacy, so the PBM can pocket the rest. Spread pricing can cost an insurance plan money and can also inflate the cost of prescription drugs.
This doesn’t mean you should consider going without a PBM. They are an integral part of the pharmacy benefit system. This just means that the best way to protect your organization is to work with a credible, transparent PBM and to closely negotiate the details of your contract.
Choosing the right PBM
Choosing the right partner is a big decision. A knowledgeable PBM improves member outcomes, identifies care gaps and helps lower drug costs through negotiation and formulary management.
The best route to a pharmacy benefit that serves both employers and patients is to work with a PBM partner whose business model is based on integrity and full transparency.
Find your PBM today
Explore your pharmacy solutions with HealthPartners for a comprehensive approach that centers on your employees and bottom line.