PBMs: Who, What, and Why Change

Pharmacy Benefit Managers (PBMs) have been a particular topic of interest as of late. But, what is a PBM? And what makes them so important?

PBMs and You

These companies are third parties hired by insurance companies, private employers and government entities to manage drug benefit programs. Only originating a few decades ago, PBMs already have a large impact on health care decision making in the United States. As prescription drug coverage has expanded, so has the role of PBMs who now impact a majority of prescription drug transactions today. Originally founded to reduce prescription drug costs, improve convenience and safety, and protect Medicare patients, concerns have risen about what PBMs actually do.

According to PCMA, PBMs manage prescription drug plans for more than 266 million Americans and boast they project to save parties $654 billion. However, recent research has shown that PBMs have begun to negotiate discounts and rebates from pharmaceutical manufactures that they instead keep instead of passing on to patients. This results in patients paying amounts that may not actually reflect a lower drug cost.

Learn more about PBMs and how they work by watching the short video below from Kaiser Health. 

The transparency of Pharmacy Benefit Managers has been particularly questioned as of late. Since PBMs negotiate pricing, the pharmacy is unaware of the health plan’s payments, whilst the health plan is unaware of the amount the pharmacy is rebated for dispensing the medication. This allows for a ‘spread’ in pricing, acting as a source of revenue for PBMs.

PBMs and Diabetes

The American Diabetes Association estimates that diabetes, already the most expensive chronic illness in the USA, has a total cost of more than $327 billion per year, including $15 billion for insulin, and the price keeps increasing as additional price increases were introduced early this year. Almost every pharmaceutical company that rolled out a price increase in January 2019 cited that all, or the majority, of the price increase was being utilized for rebates to be paid to health plans or PBMs. This rise in cost indicates PBMs may have a particular goal to negotiate higher rebates instead of lower prescription drug costs, causing little to no savings to the consumer.

PBMs and New Legislation

Recent legislation has focused on reworking this rebate system. The Trump Administration has proposed regulations that would encourage lower prescription drug costs via incentives, and reduce out of pocket spending. The Department of Health and Human Services Secretary Alex Azar shares that the Trump Administration aims to end backdoor deals in the pharmaceutical industry, particularly through the rebate system. The recent proposal aims to provide a new level of transparency to pass discounts directly to patient consumers. Read the full proposal here.

As the voices of the diabetes community, we encourage you to share your thoughts on the proposal and the state of PBMs.

We encourage you to tweet your thoughts on the Trump Administration’s proposal and the proposed changes to the rebate system. Consider using hashtags like #PBM and #APF to connect with relevant threads of other’s opinions.

We’ve linked some strong resources for you throughout the article (and here!) to learn more about PBMs and the new proposal. The best way to inspire change is to become an educated informant, so take a moment to read!

With the House and Senate locked on partisan debates, it’s more important than ever to encourage bipartisan conversations on health care. Engage in informed conversations with your friends, family, and neighbors to learn about their opinions.

We look forward to hearing your thoughts on the progression of health care legislature as we work on safety, quality, and access with you: the patient.

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