How Pharmacy Benefit Managers Help You Control Drug Costs

In October 2015 we discussed some of the forces driving prescription costs up and gave some pointers on what employers can do to control employee prescription drug costs. Here’s a brief overview of how pharmacy benefit managers (PBMs) help in that process.

Your PBM plays an important role in helping control employee drug expenses.

• PBMs manage approximately 70 percent of the 3 billion+ prescriptions dispensed each year in the U.S.
• Today, approximately 95 percent of patients with drug coverage receive benefits through a PBM.
• PBMs manage pharmacy benefits for nearly 200 million Americans.

A PBM manages prescription benefits for members of a group. Employers can contract directly with PBMs or through their insurer or managed care entity. Unlike insurers, PBMs generally don’t assume any insurance risk, but do take responsibility for assuring the quality and safety of prescriptions issued, along with meeting specific cost containment goals.

In addition, many PBMs provide value-added services. These include checking medications against a patient’s health condition and other medications when a prescription is filled for drug interactions, disease interactions, correct dose, excessive use, and drug expiration date.

Some also offer case or disease management, where the PBM provides education to the patient and physician, helps manage a patient’s prescription drug regimen—for example, sending reminders when it’s time to refill—and follows up on claims to evaluate which drugs are effective at treating a condition. PBMs can also help control costs by monitoring the prescribing patterns of physicians within a network and recommending more effective drugs where available.

Who pays the PBM? The PBM receives payment in the form of administrative fees and/or rebates from drug manufacturers. PBMs develop relationships with drug manufacturers and negotiate discounted prices based on volume. Manufacturers will give the PBM rebates estimated at between 5 and 25 percent on brand-name drug spending by PBM members. Insureds generally receive a discount on their drugs over the full retail price; however, since most individuals with drug coverage receive benefits through a PBM and the industry is becoming increasingly concentrated, differences in discounts between PBMs is likely to be small.

Many employers critique their relationship with their PBM as too opaque. Only 42 percent of respondents to the 2015 PBM Customer Satisfaction Report said their PBM relationship is completely transparent. Knowing the questions to ask can help you evaluate a PBM and whether it will truly deliver the savings you expect. You will need data on how effective it is at controlling costs; how effective it is at channeling patients toward generic or mail-order prescriptions, where appropriate; and on the level of service and convenience it represents for your plan members.