5 Top Problems with pharmacy benefit managers

There are different problems with pharmacy benefit managers although, pharmacy benefit managers come with many advantages. We sought to explain key problems with pharmacy benefit managers’ practices and controversies.

According to the American Pharmacists Association, “PBMs are primarily responsible for developing and maintaining the formulary, contracting with pharmacies, negotiating discounts and rebates with drug manufacturers, and processing and paying prescription drug claims.”

problems with pharmacy benefit managers and American pharmacy association

In 1968, the first PBM was founded when Pharmaceutical Card System Inc. (PCS, later AdvancePCS) invented the plastic benefit card.

By the “1970s, they serve as fiscal intermediaries by adjudicating prescription drug claims by paper and then, in the 1980s, electronically.

Introduction on the problems with pharmacy benefits managers

The problems with Pharmacy benefit managers are worth putting into consideration, however, these companies manage prescription drug benefits on behalf of health insurers, Medicare Part D drug plans, large employers, and other payers.

By negotiating with drug manufacturers and pharmacies to control drug spending, PBMs have a significant behind-the-scenes impact in determining total drug costs for insurers, shaping patients’ access to medications, and determining how much pharmacies are paid.

PBMs have faced growing scrutiny about their role in rising prescription drug costs and spending.

Pharmacy benefit managers (PBMs), in their role as third-party administrators of health plan drug benefits programs, are an important factor to consider when evaluating healthcare costs.

Yet, in contrast to other players in the market, PBMs operate with little transparency or regulation while yielding significant profits which will also be considered as one of the problems with pharmacy benefit managers.

Problems with pharmacy benefit managers

There are many problems with pharmacy benefit managers and in this article, we are going to look at some of these problems and controversies.

  • Pharmacy benefit managers have less competition
  • Not as transparent as the claim
  • Drugs are given based on the company’ preference
  • PBM can cause drugs to be overpriced in some cases
  • The actions of the Pharmacy benefit managers can affect the local pharmacy

 

Pharmacy benefit managers have less competition

Among the problems of pharmacy benefit managers, having less competition has really drawn attention to the public. PBMs having few competitions and dominating over 70 percent of drug pricing in the united states make the companies more of autonomy in their operation.

Furthermore, the absence of strong competing forces allows PBMs to pocket rebates, lacking the incentive to cut costs for consumers by passing along those savings. In fact, rebates have tripled to over $170 billion between 2012 and 2018, according to PMBWATCH, with increasingly smaller portions of rebates being passed on to patients.

The American Medical Association, opposing the mergers, submitted a letter to the Assistant Attorney General pointing out the anti-competitive nature of the CVS/Aetna merger.

While the proposed merger is vertical, acquiring a different entity along the supply chain, horizontal competition stands to be heavily affected as well.

Not as transparent as the claim

In view of the problems with pharmacy benefit managers, there is a controversy concerning the PBM operations on their transparency.

While PBMs market themselves as being well-positioned to bring savings to plans and consumers, a lack of transparency in their practices enables them to exercise their power to increase their profits, often at the expense of the consumer.

When they Utilize spread pricing by charging health plans more than they reimburse pharmacies and pocketing the difference is too many shows that they are not transparent.

This has prompted policymakers to consider reforming the rebate system by increasing transparency or requiring PBMs to pass through more rebate savings.

It is in no doubt one of the problems with pharmacy benefit managers. Also, other examples of controversial practices have included incentives driving formulary status and prohibiting pharmacists from disclosing information on lower-cost prescription alternatives.

Drugs are given based on the company’ preference

Pharmacy benefit managers are involved in this deceptive act of giving drugs based on their preference and not of that of patients, this can be said to be one of the cardinal problems with pharmacy benefit managers.

In the same vein, classifying certain generic drugs as brand drugs and charging brand prices is also a big blow in the drug negotiation and dispensation sector.

Promoting drugs based on the rebate the PBM obtains, not in the consumer’s best interest. PBMs will prefer brands from which they get the highest rebate, even if there is an equally well or better-suited drug that is cheaper for the consumer.

Sometimes PBMs will even switch patients’ prescriptions without the knowledge of the patient, just so that the PBM can receive the rebate and this can be one of the major problems with pharmacy benefit managers.

PBM can cause drugs to be overpriced in some cases

To some, this sounds confusing because PBMs are known for many drug prices affordable and worthwhile. Here the reverse can the case some drugs are overpriced because of the operation of the PBMs.

One of the popular modes of operation of the pharmacy benefit managers if the rebate, however, this rebate can be one of the problems with pharmacy benefit managers.

A rebate is the amount of money that a business or company pays back to you because you have bought a particular product or service.

In the case of PBMs, a drugmaker agrees to pay a PBM each time a certain prescription is filled. The drugmaker willing to pay the highest rebates is given higher priorities than others on PBM formularies not really considering the effects on patients.

Now, the patients, however, pay a percentage of the list price, not what the PBM ultimately paid for the drug.

This mode of operation drives up list prices at the expense of patients and such can be said to be one of the problems with pharmacy benefit managers.

The actions of the Pharmacy benefit managers can affect the local pharmacy

PBMs go as far as having their own pharmacy outlets and this is a big blow to the local pharmacies.

Its incentives shift from negotiating the lowest cost method of drug distribution to driving profits from its own pharmacy operations, and thereby effectively forcing payors and consumers into using the PBM-owned mail order, specialty, or retail pharmacies.  

problems with pharmacy benefit managers

Consumers strongly prefer dealing with a community pharmacist and especially for specialty pharmaceuticals, the pharmacist provides invaluable counseling and patient monitoring although the PBMs overshadows them.

ESI and CVS have acquired or driven out rival specialty pharmacies, expelling them from their networks, and targeting their consumers. ​

In addition, PBM-owned mail orders often increase utilization and costs by dispensing unnecessary drugs.  

The conflict of interest denies consumers access to quality health care and increases the cost of overall health care to plans and consumers.

Conclusion

Pharmacy Benefit Managers work in conjunction with drug manufacturers, wholesalers, pharmacies, and health insurance bodies and play no role in the physical distribution of prescription drugs, only handling negotiations and payments within the supply chain

There are problems with pharmacy benefit managers but the numerous benefits can not be neglected. Knowing the problems will give a better insight into addressing these problems.

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