What Are Pharmacy Benefit Managers (PBMs) and Their Advantages?

September 28, 2011 by  Filed under: Management 

The world of pharmacy benefit management is extremely dynamic and the marketplace continues to shift on a daily basis. The largest players in the industry include Express Scripts, Medco, CVS Caremark, United HealthCare, and a host of others. Pharmacy Benefits Managers (PBMs) can be independent or a part of another entity like a health insurance provider or pharmacy chain. PBM’s manage and administer the prescription drug part of health insurance plans on behalf of plan sponsors, which can include HMOs, self-insured employers, PPOs and indemnity insurers. PBMs have many of the characteristics of managed care, including that of having a provider network. Typically, PBMs contract with existing community pharmacies to create a network of pharmacies from which patient can receive prescriptions at the rate established by the plan sponsor. PBMs negotiate with network pharmacies for decreased product reimbursement prices in exchange for increased volume of prescriptions. PBM offer services such as pharmacy network development, claims processing, eligibility maintenance, client report, rebate contracting, generic use programs, formulary management, therapeutic interchange, mail service, drug utilization review, patient provider education, step therapy and diseases management.

PBM’s use many tools to manage the pharmacy benefit. An overview of these “tools” is below:

1. Limited networks-only certain pharmacies are included in the list of outlets where patients can obtain drugs. These are chosen by the PBM based on volume discounts, quality and customer satisfaction. The PBM needs to guarantee access by ensuring that the distance to participating pharmacies is not too great.

2. On-line payment and administrative systems.-PBMs maintain real-time computer systems that ensure that drug warnings and DUR (drug utilization review) messages are collected and communicated by the pharmacist to the patient at time of drug dispensing. On-line claims adjudication ensures that the patient gets covered medications promptly, and reduces fraud.

3. Formularies, generic substitution and Rebates-PBMs control the use and cost of drugs by limiting their coverage to drugs approved on their formularies. This gives them the ability to choose formulary drugs that meet their standards of quality. It also gives them the opportunity to negotiate price discounts and rebates from manufacturers to help control costs of the pharmaceutical benefit. Generic substitution moves the patient to cheaper generic medications, when appropriate, to save money.

4. Drug Utilization Review (DUR)-Prospective and Retrospective DUR make sure that drugs are used appropriately and in accordance with scientifically established treatment guidelines. Prospective DUR is built in to the online claims adjudication systems and can prevent a patient from being dispensed an inappropriate medication. Retrospective DUR evaluates the drug treatment patterns for different patients and providers to ensure that excessive or inadequate utilization patterns are avoided, depending on disease and other patient characteristics.

5. Cost-sharing-Increasing the amount of money that the patient pays, either for certain drugs, or for not using mail order or for other factors is a tool to manage utilization and costs.

6. Patient and Provider education-PBMs often communicate with the health care providers and patients to ensure that they are utilizing medications appropriately, and according to treatment guidelines.

PBM’s also utilize clinical management techniques and disease management techniques, mail service pharmacy and innovative plan designs to accomplish their goals. PBM’s will also negotiate rebates with manufacturers and pass on some of the savings to the contracted health plan.

I am currently a biotech consultant working primarily on pipeline biologics. I am also a part of the moderating team for the TalkPharma.com pharma forums, where contributors talk about various topics regarding healthcare administration, pharmaceutical development, managed care, clinical trials, drug marketing, and the law. Join us in ongoing discussions on various topics or start your own message board threads today!

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