Pharmacy Benefit Managers: Who is benefiting?

This is a commentary on something broken that needs to be fixed.

What is a Pharmacy Benefit Manager (PBM)?

They manage pharmacy benefits for your insurance company or employer (if your employer is “self insured”). PBMs create the formulary, ie what drugs are available at what cost to the patient. They negotiate the price the insurance company will pay the pharmacy. They also determine what the patient copay will be for a drug (the copay is paid to the PBM); and managing mail order prescriptions.

By Mark Brakke

cent rebate is now on a 20 percent higher manufacturer’s list price. As a result, the patient gets stuck with a higher price.

Whoa you say. That is crazy.

This issue has been looked at analytically and studies documenting this have been published. One article which can link you to a pertinent research paper is: https://healthpolicy.usc.edu/article/ new-evidence-shows-prescription-drugrebates-play-a-role-in-increasing-listprices/ the PBM, makes a greater profit if pharmaceutical prices are higher. The insurance company is focusing on maximizing profit, not on maximizing value for the patient. maceutical manufacturers need to make an adequate profit. The current marketplace is not functioning to produce the correct balance.

A sensible step for making this market work better for the patient would be to not allow rebates. The formulary should be made up using the necessary drugs at the best price which can be negotiated — no rebates (bribery) allowed.

If we want to fix this problem, we need to let our elected officials know we want U.S. drug prices to be similar to the prices in other modern prosperous countries. (Currently, U.S. drug prices are about double that of other modern, prosperous countries.)

Be a squeaky wheel.

Let’s look at a piece of this process. Assume the PBM gets paid for its work on a percentage of the revenue which is managed. When the PBM is creating the formulary it negotiates with the drug manufacturers, the PBM can offer to place a drug in the formulary if given a rebate of 20 percent of the dollars spent on that drug. The manufacturer wants the business, but does not want to see its profit margin shrink; so the manufacturers’ prices go up 20 percent. This works out well for the PBM since its 20 per-

The three largest PBMs in the United States are Express Scripts, owned by Cigna; Caremark, owned by CVS; and Optum Rx, owned by United Health Care. They control 79 percent of the PBM business in the United States.

The business details of these PBMs are not available for public scrutiny; but enough information exists for us to know they produce a very substantial portion of the profit margin of the parent corporations. You may see the incestuous nature of this relationship. The insurance company, which owns