What is Pharmacy Benefit Management?


A pharmacy benefit manager or PBM oversees the prescription drug benefits offered by many types of health insurance plans. PBMs design prescription drug formularies, negotiate rebates and discounts with drug manufacturers, and work to control costs for payers such as health plans and self-funded employers.

Role of Pharmacy Benefit Managers


Pharmacy Benefit Management play an important role in managing the rising costs of prescription drugs. Here are some of the key responsibilities of a PBM:

Drug Formulary Management

 

covered drugs under a health plan. Drugs are assigned tiers based on their costs and potential alternatives. Higher tier drugs require larger copays from plan members to encourage use of lower-cost options. PBMs negotiate with drug makers to add lower-cost generics and biosimilars to formularies.

Rebate Negotiations


PBMs leverage their large member base to negotiate rebates and discounts directly from pharmaceutical manufacturers. Manufacturers may offer rebates in exchange for preferred placement on a formulary or avoiding restrictions like prior authorizations. Rebate savings are passed on to health plans and employer groups.

Pharmacy Network Management


PBMs establish extensive retail pharmacy networks through contracts. They negotiate drug prices and dispensing fees with pharmacies. Using network pharmacies over out-of-network options lowers costs for plans and members through these negotiated rates.

Mail Order and Specialty Pharmacies


In addition to retail pharmacy networks, PBMs operate their own mail order and specialty pharmacies. Mail order pharmacies dispense maintenance drugs through mail delivery at lower costs than retail. Specialty pharmacies manage distribution of high-cost injectable and infused drugs for conditions like cancer.

Utilization Management Tools


PBMs use tools like prior authorizations, step therapy protocols, and quantity limits to steer usage toward lower-cost, evidence-based treatment options. These programs are intended to improve care and ensure drugs are used appropriately according to clinical guidelines.

 

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