Pharmacy benefit management

Pharmacy Benefit Management (PBM) is a service that assists in the administration of prescription drug programs. PBMs are primarily responsible for developing and maintaining the formulary, contracting with pharmacies, negotiating discounts and rebates with drug manufacturers, and processing and paying prescription drug claims. They are used by health insurance companies, self-insured companies, and government programs to manage the cost of prescription drugs.

Overview

PBMs are third-party administrators of prescription drug programs for commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Program, and state government employee plans. They are tasked with negotiating with pharmacies and drug manufacturers to access lower drug costs, developing and maintaining formularies, processing claims for prescription drugs, and managing pharmacy networks.

Functions

Formulary Management

A formulary is a list of prescription drugs, both generic and brand name, that are preferred by the health plan. The PBM uses clinical trials, drug efficacy, and cost to determine which drugs are included in the formulary.

Pharmacy Network Management

PBMs contract with pharmacies to create a network of pharmacies for the health plan. They negotiate the dispensing rates and ensure the pharmacies meet certain quality standards.

Claims Processing

PBMs process and pay prescription drug claims. They also handle the complex billing processes involved with pharmaceutical care.

Rebate Negotiation

PBMs negotiate rebates from pharmaceutical manufacturers in return for including their products in the formulary. These rebates help lower the overall cost of the prescription drug plan.

Criticisms

PBMs have been criticized for lack of transparency in their operations. Critics argue that the rebates negotiated by PBMs are not always passed on to consumers, leading to higher overall drug costs. There have also been concerns about potential conflicts of interest, as some PBMs own mail-order pharmacies.

See Also

• Pharmacy
• Health Insurance
• Medicare Part D
• Formulary