• Ronnie Shalev, MD

Pharmacy Benefit Managers: Basics 101

Have you ever wondered why certain drugs have a different price at one pharmacy versus another? Ever heard about a pharmacy benefit manager or PBM?

A PBM is a third-party administrator of prescription drug programs for health plans. They are primarily responsible for developing and maintaining the drug formularies, contracting with pharmacies, negotiating discounts and rebates with drug manufacturers, and processing and paying for prescription drug claims.

PBMs were designed with the idea that their collective buying power would reduce health care costs and pass the savings on to consumers in the form of cheaper prescription drugs. They act like giant buying networks for drugs, representing consumers from multiple employers and insurers. PBMs use their buying power to lower the total cost of prescription drugs.

In theory, these sound advantageous to the employers and the patients, right? Well, the PBM industry claims to provide significant cost savings for patients and health plans, however, these claims are controversial. There is no transparency in this industry. PBMs are not required to disclose prices, rebates, or margins on drugs. Interestingly, the largest PBMs had higher revenue than the largest pharmaceutical manufacturers in 2017.

So how do PBMs make money?

  • Administrative fees and service fees from the health plan

  • Collecting rebates from the drug manufacturers

  • Spread pricing- when the PBM sells a drug at the “sticker price” but actually negotiated a lower purchase price→ they pocket the difference.

  • Clawback Strategies- when the PBM pockets the price difference between the patient’s copay and the confidential purchasing price. 25% of the time the cost of the insurance copay is more than the cash price of the drug

PBMs are middleman that ultimately can either save employers money, or they can rip off the employers, by making more money when choosing a higher priced drug over a lower priced drug.

If incentives between PBMs, health plans, and consumers were aligned, pharmacy benefit managers could aid in controlling increasing prices for prescription drugs.

MediBookr tips for saving on prescription drugs:

  1. Ask your pharmacist if you are paying the lowest price

  2. Let your doctor know that you are price sensitive. Many times your doctor can prescribe a generic or different medication that will work just as well.

  3. Check websites that offer free coupons such as refillwise.com, goodrx.com, needymeds.org, blinkhealth.com. Even if the coupon is not for the pharmacy you go to, ask your pharmacist if they will match the price.

-Dr. Ronnie Shalev is a board certified emergency medicine physician and the Chief Medical Officer of MediBookr