What are Pharmacy Benefit Managers?

PBMs Largely Determine How Much Your Medicines Cost

With public policy debate at Colorado’s State Capitol focused on prescription drug price transparency, it’s critical for our decision makers and their constituents to examine all of the players in our complex health care system.

One of those players is the Pharmacy Benefit Manager, or PBM. While you may recognize their names, Express Scripts (recently acquired by Cigna), CVS Caremark and OptumRx, you may not know these multi-billion-dollar companies largely determine what you pay for prescriptions at the pharmacy counter.

Here are five things you need to know about PBMs:

1. PBMs are powerful. Express Scripts, CVS Caremark and OptumRx control an estimated 85% of the market for prescription medicines.

2. PBMs manage drug formularies on behalf of your insurance company or employer. These are lists of preferred medicines approved for doctors to prescribe. Manufacturers must negotiate discounts and rebates with the PBMs in order to be included in a formulary.

3. Rebates negotiated by PBMs don’t necessarily lower the price you pay. The PBM can return the rebate to your employer, keep part of the rebate or keep all of the rebate as profit.

4. PBMs dictate what pharmacists can tell you about your prescription drug costs. PBMs maintain strict contracts with pharmacies that may prohibit your pharmacists from letting you know that you could save money by paying cash for your prescription. Some states, including Colorado, are looking at banning these “gag clauses.”

5. PBMs charge pharmacies fees that are included in the final costs of your prescription drugs. In addition to the fees earned from contracts with your employer and insurance company, and possible rebates provided by the drug manufacturer, PBMs charge pharmacies fees that can account for up to 11% of a drug’s cost.

Most of the control over how much you pay for your prescription medicines rests with your insurance company, your employer and your PBM.

Colorado BioScience Association advocates for true transparency as our state policymakers consider prescription drug costs. This means addressing the health care system as a whole and considering every player to make meaningful changes for patients and their families.

Categories: CBSA News