Pharmacy Benefit Managers: The Hidden Middlemen in Drug Pricing

pharmacy benefit managers, PBMs, ExpressScripts, drug pricing, drug costs

Pharmacy Benefit Managers (PBMs) such as ExpressScripts are large organizations that influence how pharmacists and doctors prescribe drugs. They play a role in what drugs are available to the patient and how much the drugs cost. The PBM works as an intermediary between the insurance company and the patient. PBMs negotiate on behalf of insurers and other parts of the healthcare industry, like Medicare Part D.

Pharmacy benefit managers are compensated through rebates, administrative fees, and pharmacy spread.  

What pharmacy benefit managers do

  • Negotiate rebates and discounts with pharmacies and pharmaceutical companies
  • Dictate which drugs patients can get without out-of-pocket costs
  • Operate mail order for medications
  • Make sure patients take medications as prescribed
  • Process claims from patients and pharmacies
  • Manage drug formularies, or lists of which drugs are covered under which plan
  • Manage distribution of medications among various pharmacies

The five biggest pharmacy benefit manager companies

  • ExpressScripts. ExpressScripts is the only independent PBM not owned by or affiliated with a pharmaceutical company.
  • CVS Caremark. CVS Caremark provides drug benefit services to over 2,000 participants throughout the U.S.
  • Argus. Argus supports Medicaid and Medicare Part D. Argus’s clients range from managed care organizations to pharmaceutical manufacturers.
  • Envision. Envision is one of the largest PBMs, and was recently acquired by Walgreens.
  • ProCare RX. ProCare RX is a national PBM with years of experience in healthcare IT.

Since these companies are so large and have little government oversight, there is concern over the lack of transparency in some of their practices.

For more information

For more information, see this video courtesy of Kaiser Health News on the history, the good, and the bad of PBMs.

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