Pharmacy Benefit Mangers (PBMs)
Pharmacy Benefit Managers, Who Are They and What Do They Do?
When you walk into the pharmacy to pick up a medication and present your insurance card, how does the pharmacy bill for the medications? Not only that, but how many times have you went to the pharmacy, presented an insurance card, to only have them say they need a different card. The way to bill for prescriptions is not as straightforward as going to the doctor. Health insurance has a medical side to bill for all procedures done at a clinic and then a pharmacy benefit manager (PBM) which is used to bill medications. For the medical side, it is simple. You present your card, and you have a set copay for each visit. For medication the pharmacy benefit manger is the one who controls the pricing of your medications. This allows for a ton a variation in price depending on the cost of the drug, brand or generic and much more.
3 Main PBM
There are 3 main pharmacy benefit managers who controls about 90% of the market. They are Express Scripts, CVS Caremark (part of CVS), and OptumRx (owned by UnitedHealth Group). PBM’s are commonly called the middleman. There only service is to work in conjunction with manufacturers, wholesalers, pharmacies, and health insurance providers. Their role is to hand the negotiation and payments within the supply chain. PBM’s negotiate contracts with drug manufacturers on behalf of insurers and are paid a rebate by that drug manufacturer. Another organization called Pharmacy Services Administrative Organizations (PSAOs) negotiated reimbursements with PBM on behalf of the pharmacy. PBM’s then pay the pharmacy on behalf of the health insurance provider what each drug dispensed to patients. PSAOs work directly with pharmacies vs PBM’s who I stated work for the health insurance provider.
How Do PBM’s Make a Profit
PBM’s make money primarily through administration fees charged
for their services. In laymen terms,
they tell the health insurance to pay $20 for a medication but have the pharmacy
charge the patient $25. The PBM would take
the difference of $5. To put it in perspective,
PBMs make a set amount of money. Depending
on the cost of the medication, this could be a significant amount. Not to get too off topic, but I cannot tell
you how many times I have checked prescriptions where our pharmacy is losing
money. The drug literally cost more money
than what we are getting paid. I do not
know about you, but I do not know what business is able to operate when they sell
a product at a loss.
PBMs have been a burden for all pharmacies, especially independent
pharmacies. A few years ago, Walgreens stopped
accepting express scripts as a PBM due to their negative reimbursement. The question comes when this will stop? When will more transparency be available? These questions may never be answered. In my opinion, the main reason has to do with
the business model of PBMs and the lack of information provided. We currently have politicians who have no
idea how PBMs work or can warp their heads around the idea of losing money on
something out of your control. My only
hope is we see transparency. Require the
PBMs to report their reimbursement and we as independent owners and staff
members need to step up to help find a solution.