Lately, pharmacy benefit managers (PBM) have been a topic of conversation. Although they tend to be helpful for insurance companies and sizable employers, they have come to light because of many controversies regarding their practices. So before judging this service, ensure you know all the relevant facts about PBMs.
1. What Are They?
PBMs are businesses that manage drug benefits for health insurance providers, large companies, and other corporations. They can negotiate with pharmacies and drug manufacturers, which impacts a large portion of prescription medication services, including costs and patient access. The top PBMs also offer specialties, such as working exclusively with workers’ compensation claims.
2. Do They Affect the Cost of Drugs?
Although the Federal Trade Commission has kept a close eye on PBMs, they are the middle man on the drug distribution chain. Typically, their role includes maintaining lists of covered medicines for specific insurance companies, negotiating discounts from manufacturers, and helping pharmacies get reimbursed for drugs given to beneficiaries.
Their ability to negotiate has enabled PBMs to help lower the cost of pharmaceuticals, which has helped lower total spending on drugs. However, they are suspected of preferring high-cost prescriptions over more economical ones. This suspicion stems from the fact that most PBMs receive a percent of the rebate sent to the pharmacy, which means they receive more income when patients receive more expensive medications. That can leave people with more costs they have to pay out of their pockets.
3. What Is the Controversy Over Their Rebates?
Drug manufacturers have recently claimed that the rising rebates negotiated by PBMs force manufacturers to raise their drug prices. Between 2012 and 2016, the total amount of money collected by PBMs nearly tripled. As a result, most PBMs are being forced to send a more significant portion to insurance companies. Since these rebates generally aren’t public knowledge, a controversy has emerged over whether these businesses should be allowed to keep this money.
One side of the controversy argues that PBMs should pass more rebate money to insurers. They say that this could help insurance companies provide lower-cost plans to people. One of the biggest combats of this argument is that a survey of larger PBM companies notes that they pass up to 91 percent of their rebate money to the insurance company. However, smaller insurance companies and employers said they don’t receive this percentage.
4. What Is Spread Pricing?
Another controversial practice undertaken by PBMs has spread pricing. With this, PBMs receive more money for generic medications than they pay the pharmacy and keep the extra. Again, this issue occurs because there is no transparency in the PBM world. In this instance, the PBMs are not required to release their payment schedules to the insurance companies.
5. How Do Policymakers Plan To Regulate Them?
One way policymakers would like to regulate PBMs is by demanding greater transparency. That can provide the federal government with the information it needs to make more informed decisions about PBMs and pharmaceutical spending. Policymakers have also considered banning spread pricing. That can ensure that insurance companies and employers do not overpay for medication. Another option for limiting spread pricing is to demand more transparency in PBM cost schedules.
Finally, policymakers have considered requiring that PBMs pass more of their rebate money to insurance companies or patients. In this situation, PBMs who take in rebate savings would have to give the insurance companies 90 percent. The other option proposed is to pass part of their rebate savings to policyholders. The government has already considered requiring that the PBMs working for the Medicare Part D plan pass one-third of their savings to patients.
PBMs are a necessary middleman that helps negotiate lower prices for prescription medications. They intend to work for insurance companies, employers, and patients by negotiating lower prices. However, their lack of transparency has led to issues with rebate money and spread pricing that federal policymakers strive to correct.