Pharmacy Benefit Manager (PBM)
What is a pharmacy benefit manager (PBM)?
A PBM is a third-party company that acts as an intermediary between pharmaceutical manufacturers and insurance providers. It is their task to negotiate rebates with manufacturers, create formularies, create pharmacy networks, process claims, and review drug utilization.
The PBM negotiates discounts with drug manufacturers for the insurance companies. In exchange for the discount, the manufacturer’s drug is put in front of millions of customers.
Competition amongst PBMs is fierce, as they are all working to position themselves for contract negotiation with an insurance company.
There are some common criticisms of the PBM industry. As third-party negotiators, their business practices are not entirely transparent, so they do not always disclose discounts, rebates, itemized billing statements, or the percentage of savings passed on to insurers. This can make it challenging to gauge their true impact on drug costs from a patient standpoint.
How do PBMs benefit healthcare?
As the behind-the-scenes negotiator on drug spending, PBMs significantly impact insurers’ total drug costs. In fact, their ability to negotiate larger rebates has helped to lower the prices of drugs, which makes pharmaceuticals more accessible and allows more patients to afford the drugs they need to manage or treat their medical conditions.