Are PBMs the Big Bad Wolf?

Pharmacy benefit managers (PBMs) are a large part of our health care benefits, but do they bring value? A PBM is responsible for administering and processing pharmacy claims; providing a network of pharmacies for dispensing; providing mail order services (90-day supply); negotiating with manufacturers for rebates; optimizing plan performance for clients; and ensuring safe, low cost, and clinically appropriate medication utilization.

So, What’s All the Fuss?

For starters, President Donald Trump pointed to PBMs for driving up drug prices and increasing overall US health care spending. At the center of his argument are PBM rebates from drug manufacturers. So, what are they?

A drug rebate is a price concession paid from a drug manufacturer to a PBM and are typically applied to high-dollar brand name prescription drugs that have many competitors. The rebate is an incentive for the PBM to add the manufacturer’s brand product to its formularies. The PBM then shares the rebate with the health insurer.

Pharmacy Aside

Let’s take a moment to discuss rebates in general. By definition, a rebate is a type of marketing promotion that is used to encourage a consumer to purchase a product. It is an amount paid, by return, refund, or reduction in what has already been paid by a consumer.

Have you ever used a mail-in-rebate after purchasing a set of tires for your car or maybe you purchased a 1-year supply of contact lenses? These items commonly offer mail-in rebates. How about coupons? Do you use coupons when you shop at the grocery store? Save $1 on laundry detergent? If you have, then you too, have taken advantage of a rebate. Why wouldn’t you?

Drug Rebates

So, everyone wants a piece of the drug rebate. PBMs want it to offset their costs, the health insurer wants to use a portion to lower premiums and out-of-pocket costs to their members, and the consumer thinks it should be completely passed on to them.

Meanwhile, the administration is proposing that drug rebates should be removed completely, reducing the need for high drug prices to begin with. It is unclear whether or not a rebate-free system would actually work. There is no doubt the entire strategy is flawed, however, is it completely the fault of the PBM?

Will we ever see a good solution? It’s likely we will as the 3 largest PBMs have either acquired or been acquired by a health insurer. CVS purchased Aetna, Cigna purchased Express Scripts, and United Healthcare purchased Optum.

This turn in the market and change in the business model may foster innovative strategies to help solve the problem of rising drug prices. These newly combined companies will have to put the consumer first to truly make an impact on reducing drug costs. By partnering with providers and basing formularies on the most beneficial, cost-effective choice for the consumer, PBMs can and will make a difference.

About the Author

Nicole Kruczek earned her B.S. in Pharmacy degree from Temple University and is currently enrolled in the Masters of Pharmacy Business Administration (MPBA) program at the University of Pittsburgh, a 12-month, executive-style graduate education program designed for working professionals striving to be tomorrow’s leaders in the business of medicines. She has spent the last two decades in management roles in various pharmacy operations in long-term care, specialty, and PBM.