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Pharmacy Benefit Management Companies: Do They Create Value in the US Healthcare System?

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Abstract

Pharmacy benefit management companies (PBMs) perform functions in the US market-based healthcare system that may be performed by public agencies or quasi-public institutions in other nations. By aggregating lives covered under their many individual contracts with payers, PBMs have formidable negotiating power. They influence pharmaceutical insurance coverage, design the terms of coverage in a plan’s drug benefit, and create competition among providers for inclusion in a plan’s network. PBMs have, through intermediation, the potential to secure lower drug prices and to improve rational prescribing. Whether these potential outcomes are realized within the relevant budget is a function of the healthcare system and the interaction of benefit design and clinical processes—not just individually vetted components. Efficiencies and values achieved in price discounts and cost sharing can be nullified if there is irrational prescribing (over-utilization, under-utilization and mis-utilization), variable patient adherence to medication regimens, ineffective formulary processes, or fraud, waste and abuse. Rising prescription drug costs and the increasing prevalence of ‘high deductible health plans’, which require much greater patient out-of-pocket costs, is creating a crisis for PBM efforts towards an affordable pharmacy benefit. Since PBM rebate and incentive contracts are opaque to the public, whether they add value by restraining higher drug prices or benefit from them is debatable.

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Fig. 1

Adapted from Congress of the United States, Congressional Budget Office [43]

Fig. 2

Figure reproduced with permission of the author

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  1. Henry A. Rosenberg Professor of Government, Business, and Nonprofit Partnerships, College of Public Affairs, University of Baltimore, 1420 North Charles Street, Baltimore, MD, 21201, USA

    Alan Lyles

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Lyles, A. Pharmacy Benefit Management Companies: Do They Create Value in the US Healthcare System?. PharmacoEconomics 35, 493–500 (2017). https://doi.org/10.1007/s40273-017-0489-1

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