PBMs on the frontline with cost lowering solutions

In the continuing debate over high drug prices, one industry is on the frontline with pro-market competitive solutions that are driving down prescription drug costs for consumers, employers, unions, health plans, and federal and state government programs. This industry is the pharmacy benefit managers (PBM).

PBMs increase access to medications while reducing costs and improving the quality of the pharmacy benefit for consumers. In this era of escalating prices, PBMs are becoming increasingly important to the health care system. These companies use a number of innovative tools to do their job, including negotiating with drug manufacturers and pharmacies, developing networks of pharmacies, promoting generic drugs, creating drug formularies, and managing high-cost specialty medications.

Thousands of pharmacists work in this industry, blending their understanding of the clinical value of drugs with patient needs, including the affordability of prescription drug benefits.


Sophisticated purchasers, the aforementioned employers, unions, and government health programs, hire PBMs and examine a number of factors when making this decision. This includies reviewing cost-saving choices, reviewing accreditation, reputation, past performance, and openness to transparency. Often they use consultants, experts in how best to purchase and use PBM services. In this highly competitive services environment, there are many PBM choices, both large and small. If a purchaser of those services has needs unmet by one PBM, competitors are eager to find ways to accommodate those needs if it means winning the business.

PBMs consult with their client purchasers in designing drug benefits that offer flexibility and cost-saving formularies that provide access and lower costs. How do PBMs establish formularies? Typically PBMs enlist a pharmacy and therapeutics (P&T) committee, which is a panel of outside experts — physicians, pharmacists, other clinicians — to determine which drugs are essential for treating the various conditions of health plan enrollees.

Where a drug is not given a “preferred” status on a formulary, or is even excluded from the formulary, it is because there are other treatments that are equally or more; safe, effective, and/or affordable. While formularies help ensure that drugs are safe and effective for health plan members, they also help to moderate the cost of the pharmacy benefit to patients and payers.

Understanding that a formulary drug selection will not meet the needs of every patient, PBMs work with their clients to include an exception processes that allow doctors to explain why a patient needs a non-formulary drug instead of the drug included on the formulary.

With all of these tools, purchasers are in the driver’s seat and have a clear say in all aspects of the management of their pharmacy benefit, including formulary and other plan design decisions.

Recent criticisms into how PBMs leverage competition between drug manufacturers to reduce costs is ultimately an attack on the employers, unions, insurers, and government health programs that provide prescription drug benefits to their enrollees.

PBMs are vital to the sustainability of America’s healthcare system and will continue their efforts to provide affordable prescription drug coverage for payers and patients.

John D. Jones, RPh, JD, FAMCP is an expert on managed care pharmacy practice, pharmacy law, regulation and policy. Until recently, he served as the Senior Vice President of Professional Practice and Pharmacy Policy at OptumRx, a UnitedHealth Group Company, in Irvine, California. Mr. Jones is licensed as both a pharmacist and an attorney. He currently teaches Pharmacy Law and Ethics at multiple colleges of pharmacy in California.


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