Information for Consumers

What is a PBM

Pharmacy benefit managers, or PBMs, are hired by your health plan (employer, Medicare, Medicaid, union) to process your pharmacy benefit claims and to negotiate prescription drug prices with drug manufacturers. PBMs generally make money through charging your health plan fees for processing the payment of your prescription benefit claims. Additionally, PBMs reap huge profits through "marking-up" your prescription drug benefit claims, billing your health plan more for the drug than your local pharmacist charged their patients for the drug.

PBMs also make large profits from selling prescription drugs through their own mail-order pharmacies.

These companies also receive large payments known as "rebates" from manufacturers of high-priced brand drugs based on the PBMs' ability and promise to increase the sales of specific costly brand drugs to you and other beneficiaries in the health plans that the PBMs manage. In most cases, the PBM keeps a large portion of these rebates instead of sharing 100 percent with your health plan.

The PBMs' influence on the cost, coverage, and service level associated with your pharmacy benefit go largely unrecognized by most employees and their beneficiaries. Many employers, including their human resource managers, have only a basic understanding of how PBMs make huge profits at the expense of beneficiaries like you. To protect your interests, you should know that PBMs have a tremendous impact on U.S. health care decision-making because they influence more than 80 percent of drug plan coverage. PBMs have grown into multi-billion dollar middlemen and direct competitors to community pharmacists.

For more see:

"Painful prescription: Pharmacy benefit managers make out better than their customers," Fortune magazine, Oct. 2013