Pharmacy benefit managers (PBMs) play a critical role in the pharmacy industry, as they help manage prescription drug benefits for health plans, employers, and government programs. PBMs are responsible for negotiating drug prices with pharmaceutical manufacturers, developing formularies, and administering prescription drug benefits for their clients. In this blog post, we will take a closer look at PBMs and their impact on the pharmacy industry.
What are PBMs?
PBMs are third-party administrators that manage prescription drug benefits for health plans, employers, and government programs. They negotiate drug prices with pharmaceutical manufacturers and develop formularies that determine which drugs are covered by insurance plans. PBMs also work with pharmacies to administer prescription drug benefits, including processing claims and managing medication therapy management programs.
PBMs were first introduced in the 1960s to help manage prescription drug benefits for large employers. Since then, they have expanded to manage drug benefits for a wide range of clients, including government programs like Medicare and Medicaid.
PBMs have had a significant impact on the pharmacy industry, both positive and negative. Here are some of the ways in which PBMs have affected the pharmacy industry:
- Cost Savings: PBMs have been successful in negotiating lower drug prices from pharmaceutical manufacturers, which has helped reduce the cost of prescription drugs for consumers and payers. PBMs have also developed cost-saving strategies, such as encouraging the use of generic drugs and implementing medication therapy management programs.
- Consolidation: Over the years, PBMs have consolidated, with a few large PBMs dominating the market. This has led to concerns about competition and transparency in the industry, as some argue that the consolidated market may limit competition and drive up prices.
- Reimbursement Rates: PBMs determine reimbursement rates for pharmacies, which has become a point of contention in the industry. Some argue that PBMs set reimbursement rates too low, making it difficult for independent pharmacies to compete with larger chain pharmacies.
- Formularies: PBMs develop formularies that determine which drugs are covered by insurance plans. While formularies can help control costs, they can also limit patient access to certain drugs and can be a source of frustration for prescribers and patients.
PBMs play a critical role in the pharmacy industry, helping to manage prescription drug benefits for a wide range of clients. While PBMs have helped reduce the cost of prescription drugs, they have also faced criticism for their impact on competition and transparency in the industry.