Invisible and unbeknownst to regular folks, the PBM industry operates behind the limelight, lurking beneath manufacturers, health insurance companies, wholesalers, and retailers. However, they have their fingers on every drug transaction and are subtly shaping the healthcare system.

But what’s a PBM? Basically, PBM stands for Pharmacy Benefit Manager. But what is it? What does it do?

What is a Pharmacy Benefit Manager?

PBMs are companies that were created to act as middleman between key players in the pharmaceutical industries from drug developers to patients. They are tasked to identify patients eligible for certain drugs, minimize administrative burden, and negotiate prices with manufacturers.

Ideally, PBMs are supposed to negotiate drug prices to lower their costs and help patients get the medicines they need. But is this what’s happening? Are PBMs negotiating for lower costs and affordable prescription drugs?

How Do PBMs Work?

From the time of their inception, pharmacy benefit manager companies create formularies, a list of preferred drugs. They negotiate prices with manufacturers for discounts and rebates to get the new drugs included in these formularies.

Without inclusion, insurance companies won’t cover the drugs and doctors won’t prescribe excluded drugs. This gives PBMs significant leverage when it comes to negotiating prices. The United States’ Medicare does not have its formulary, which gives PBMs formularies greater power.

How Does Negotiating Lead to Bloated Drug Prices?

PBMs want money, so they charge everyone fees to make money. Even a small retail pharmacy can be charged fees, and over the years, these fees have grown dramatically.  For cancer medications, the fees have jumped 3 percent to 11 percent of the cost of drugs.

The higher the drug price, the higher the fees. So, as you can imagine, they earn more with expensive drugs.

How Does the Negotiating Approach Affect Patients?

Patients bear the brunt of all the negotiations and fees. Not only are they paying insurers for their medications, but now they are also paying PBM indirectly for these fees. Beyond this cost, the whole system affects patients adversely in other ways.

Sometimes, doctors need to call PBM before they can prescribe a drug to see if the drug is included in the formulary. PBM may sometimes require that the drug be delivered to the patient through its specialty pharmacy.

There are instances when a patient needs a specific drug, but PBM refuses to cover it, leaving physicians scrambling trying to find ways to get the drug for their patient.

Many issues need to be fixed with the healthcare system. PMBs are just one of those things that need to be addressed by the government.