What kind of impact do PBMs have on the total amount that we spend on prescription medications each year? – PBMs are responsible for operations that take place in the midst of the chain of distribution for prescription medications. This is due to the fact that they: Use their purchasing power to negotiate rebates and discounts from drug manufacturers use their purchasing power to determine which drugs individuals use and determine out-of-pocket costs use their purchasing power to determine which drugs individuals use and determine out-of-pocket costs develop and maintain lists, or formularies, of covered medications on behalf of health insurers 2 According to research conducted by the federal Centers for Medicare and Medicaid Services, the ability of pharmacy benefit managers (PBMs) to negotiate larger rebates from pharmaceutical companies has contributed to both the reduction in overall drug prices as well as the slowed growth of spending on pharmaceuticals over the past three years.
- However, PBMs may also have an incentive to favor expensive medications over those that are more effective in terms of their cost.
- PBMs earn a greater refund for pricey pharmaceuticals than they do for ones that may give better value at a lower cost since rebates are frequently calculated as a percentage of the manufacturer’s list price.
This means that PBMs receive a higher rebate for drugs that are more expensive. As a consequence of this, individuals who have insurance plans with high deductibles or who have copays that are determined by a drug’s list price may have greater out-of-pocket payments.3
What is PBM software?
Pharmacy Benefits Management System Software that may be customized for use in the administration and processing of insurance claims.
Who are the 3 largest PBMs?
WASHINGTON, D.C. (May 25, 2022) — According to a recent analysis by Xcenda, pharmacy benefit managers (also known as PBMs) are becoming increasingly restrictive when it comes to patient access to prescription medications. Since 2014, the number of medications that were not covered by the basic commercial insurance formularies of the three main PBMs reached 1,156 in 2022, representing an increase of approximately 1,000% in the number of medications that were not covered.
- The exclusion of brand-name medications for which there is neither a generic nor a biosimilar equivalent accounted for over half (47%) of the total number of formulary exclusions, leaving patients with fewer alternatives for their treatment.
- The three largest PBMs, CVS Caremark, Express Scripts, and OptumRx, are responsible for managing eighty percent of all prescriptions and own some of the major insurers in the country, or are owned by those insurers.
These huge firms have an impact on the decisions made by insurance companies on which medications are covered and how much patients are responsible for paying out of pocket. There is a potential for patients to incur higher expenses as a result of decisions made by PBMs that were influenced by conflicts of interest.
For instance, the three major PBMs typically choose not to include insulins with lower list prices on their formularies, opting instead to cover insulins with higher list prices by offering substantial rebates. This might result in increased out-of-pocket expenses for patients who have deductibles and coinsurance, as these patients frequently pay cost sharing amounts that are related to the list price of their medications.
According to Stephen J. Ubl, president and chief executive officer of PhRMA, PBMs have earned their image as middlemen by finding methods to stand between patients and their drugs. “PBMs have earned their reputation as middlemen.” “These strategies may help intermediaries raise their earnings, but they may also cause patients’ out-of-pocket expenses to rise and make it more difficult for them to obtain the prescription medications they need.
We need to fix the insurance system so that it works the way it should, and we also need to increase the responsibility of the middlemen who are standing between patients and the care that might save their lives.” The survey came to a number of important conclusions, including the following one: Patients who have chronic diseases typically face access constraints due to PBM formulary exclusions.
For instance, the exclusion of medicines used to treat multiple sclerosis, mental health disorders, Parkinson’s disease, epilepsy, and other serious and complex conditions affecting the central nervous system experienced a dramatic growth from 2017 to 2022.
- During this time period, the number of medicines that were excluded by one or more PBM increased by an average of 51% each year.
- Even though this can result in greater out-of-pocket expenses for patients who have coinsurance and deductibles, PBMs are progressively excluding approved generic and biosimilar insulins with lower list pricing.
Two of the three major PBMs, for instance, did not cover insulin approved generics in 2022. These generics can have list costs that are approximately half as much as the price of the comparable brand product. In a similar manner, all three of the biggest PBMs in the country decided against include a biosimilar insulin with a lower list price in favor of a version with a higher list price and a significant rebate.
- Formulary exclusions have the potential to undercut efforts made by Congress and regulations already in place that are aimed to accelerate access to safe and effective medications for patients who do not have any other treatment alternatives.
- PBM exclusions of drugs that were authorized by the Food and Drug Administration (FDA) through one of the four expedited review routes have increased at a fast rate in recent years.
Between the years 2014 and 2022, a total of 178 different medications were taken out of the formularies of one or more PBMs for at least one year each. Check out the complete report right here.
Are PBMs owned by insurance companies?
A Favourable Development in the Horizon – Express Scripts, OptumRx, and CVS Caremark were the three largest pharmacy benefit managers (PBMs) in the United States in 2017, and each of them operated under an entirely unique business model. Express Scripts remained an independent company, OptumRx was owned by an insurance company, and CVS Caremark was managed by the pharmacy chain CVS Health.
- Now, there is a good chance that all of them will soon be managed by countrywide insurers.
- OptumRx, a subsidiary of UnitedHealth Group, acquired CatamaranRx in 2015, making it the fourth-largest pharmacy benefit manager (PBM) in the US at the time.
- Aetna also made an announcement that it planned to purchase Humana, but the Department of Justice put a stop to the transaction after conducting an antitrust investigation about a year and a half later.
Aetna would have been able to bring Humana’s PBM services in-house had the purchase not been successful. Anthem made the announcement in October 2017 that it will not be renewing its contract with Express Scripts but would instead start its own pharmacy benefit manager, IngenioRx, in the year 2020.
In more recent times, Aetna has made obvious its aim to control a PBM by making a proposal in December 2017 to combine with CVS Health in a transaction worth $69 billion. This proposal was made public. And only one month ago, Cigna announced that it had reached a deal to buy Express Scripts for a total price of $52 billion.
Five of the Most Prominent National Providers of Insurance and Their PBM Partners
| Insurers | PBM Partners |
|---|---|
| UnitedHealth Group | OptumRx (in-house); CatamaranRx (purchased 2015) |
| Anthem | IngenioRx (launching in-house in 2020) |
| Aetna | CVS/Caremark (purchase under review) |
| Cigna | Cigna Pharmacy Management (in-house); Express Scripts (purchase under review) |
| Humana | Humana Pharmacy Solutions (in-house) |
It is obvious that insurance companies have an interest in regaining control of PBM operations; nonetheless, the question remains as to why there has been a trend toward mergers and consolidation.
How do PBMs make money on rebates?
The Steps to Take When Establishing a Drug Discount – If you are trying to figure out how medicine rebates are determined, the best place to begin is with the blue box at the very top of this drug rebates graphic. Prescription medications are created by drug manufacturers, who then make shipping arrangements with drug wholesalers so that their medicines may be distributed to retail outlets.
The drug wholesaler then sends the items down the line to the pharmacy where they are sold. The patient receives their medication from the pharmacist once it has been dispensed. In the event that the patient is enrolled in an insurance plan, the pharmacy will submit an electronic claim to the patient’s pharmacy benefit management (PBM).
All of these prescription medication claims are compiled by the PBM, and then they are regularly forwarded on to the respective drug manufacturers in order to obtain rebates. The PBM is the one who actually receives the money for the refund, and then they are the ones who have to decide what to do with it depending on the contract they have with each specific company.