Pharmacy benefit managers (PBMs) work as brokers, assisting in drug prices and payments between pharmacies, drug manufacturers, and healthcare providers. Some providers that hire PBMs include labor unions, corporate employers, and other organizations that need health insurance.
Formulary
PBMs are also responsble for making formularies. A formulary is a list of drugs tha the health insurance will cover.
The formulary is updated daily to ensure that the drugs are the most effective and scientifically recommended for treating various diseases. It is a recommendation list for professionals regarding the most effective and affordable medications. Without pharmacy intervention, every healthcare insurance company would not have its formulary.
If the person can’t find the formulary online, they can contact the healthcare insurance company. Similarly, they can choose an alternative medicine if they don’t see the prescription drug on the list.
Role of PBMs With Pharmaceutical Manufacturers
PBMs interact with pharmaceutical firms contractually and often complicatedly. They are tasked with determining the price range of drugs and ensuring the pharmaceutical companies don’t overprice. Such efforts are made possible by specific programs discussed below:
Rebates
Part of the reason PBMs negotiate with pharmaceutical firms is to determine how much rebate they get from certain drugs. Depending on the agreement between PBM and their client, the PBM may or may not pass all the manufacturer’s rebates to the client. Rebates ensure the PBMs are well-compensated from both ends, reducing drastic price changes.
Prior Authorization
Prior authorization is another program designed to help PBMs negotiate good prices. This feature ensures patients get the right drug and the best possible medications specific to their needs. PBM companies choose which drugs undergo prior authorization. This means the drugs must get approval from the insurer before usage.
Step Therapy
PBMs also use step therapy programs to ensure patients try out a cheaper, more effective drug before going to a more expensive one. In simpler terms, step therapy is a prior authorization program that patients are required to adhere to. This saves both the employer and patient money.
How PBMs Work With Employers
When PBMs contract with an employer, they usually sign a two—to three-year deal. In the initial stages, both parties work together and sometimes consult industry gurus to create a favorable drug benefits plan. They’ll discuss co-insurance, co-payments, deductibles, and more.
Once they settle on a health insurance plan, they task the PBM to assess the drug benefits and sensitize their employees correctly. Most PBMs have a robust communication center where they talk to clients and help answer queries about payment plans and drugs.
The contract gives PBM responsibility in four main sections.
- Claims processing. PBMs are mandated to process and pay prescription drug claims in the plan.
- Clinical programs monitor ongoing treatments and their effectiveness by providing accurate data for PBMs to determine whether the plan needs to be adjusted.
- Rebate reimbursement. As pointed out, using different models, PBMs determine rebate programs with pharmaceutical manufacturers.
- Drug utilization review. Safety is vital in drug administration and usage. PBMs play a crucial role in determining drug safety through drug utilization reviews. This process examines a drug’s effectiveness, potential side effects, and interactions with other drugs. Since PBMs have a patient history, they can correctly determine a drug’s effectiveness through a drug utilization review.
The role of PBMs in the drug prescription industry is crucial in determining the price of certain drugs. While securing rebates benefits stakeholders, most experts think PBMs should focus more on drug administration than rebate packages. This orientation would make drugs cheaper and the benefits plan more incentivized towards the patient.
