How Does a Pharmacy Benefit Management System Work?

Prescription costs, already estimated at approximately 25% of the total health plan cost are expected to rise another 15% to 20%. Health care plans that are sponsored through employers generally have a prescription plan as part of the care. Drug companies can take advantage of these employers with over-utilization if they are self-funded. Prescription companies push for their drugs to be used and Americans are requesting more prescriptions from their doctors.

The middlemen to this process in the industry are the, Pharmacy Benefit Management companies or PBMs. It is their position to satisfy the manufacturers and distributors and at the same time continue to satisfy employers and their employees. The PBM can create revenue in several ways; administration fees, rebates, margins and the drugs themselves.

The PBM is hired by a health plan provider; an employer, Medicare, Medicaid, union etc. They are to process the pharmacy claims and negotiate prescription drug prices with the manufactures. The PBM will charge a fee to process the payment of the prescription benefit claims. They also make a profit through increasing the prescription drug benefit claim and bill the health plan more for the drug than the local pharmacist charged for it.

The PBM will also receive payments from the manufactures in the form of rebates for many high-priced drugs. These are an incentive for the PBM to increase the sale of certain costly brands of drugs to employees and other beneficiaries of the health plan. They generally keep most of the rebates rather than sharing any with the health care program.

Most times employees are not aware of the PBMs influence on the level of service provided by their health care pharmacy benefit. Human resource managers and employers often only have a basic understanding of how PMBs make their profits at the expense of beneficiaries (employees). They have grown into a large multi-billion dollar middlemen and employees should educate themselves on how they operate as they now have 80% of the influence on drug plan coverage.

The PBM industry offers a valuable service to provide prescription benefits to more than 225 million Americans. Through this service they generate over 300 billion dollars a year. They are able to reduce the cost of prescription benefits by negotiating discounts through the manufactures, automating administration services and managing drug usages.

PBMs do not like to disclose the exact amount they are banking by providing services. There are two ways to make sure some control is placed over their pricing when agreeing to a contract with them.
– Insist on a “pass-through pricing” for all drugs. This should also include mail generic and all retail drugs.
– Eliminate all MAC pricing terms and guarantees from the contract.
To understand these terms better and to gain knowledge on further contract checks to ensure the best contract is signed check with Phamacy Benefit Consultants