PBMs play a significant role in assisting patients in accessing benefits that lower prescription drug prices. These experts negotiate prescription prices for insurers, customers, and pharmacies by using their understanding of insurance schemes and the pharmaceutical sector. Finding out what pharmaceutical benefits managers do and the requirements to become one might help you decide if this is the right career for you. In this post, we define a PBM, describe what they do, lay out the processes to become one, discuss their typical compensation and employment outlook, and explain what a pharmaceutical benefits manager is.
A PBM is what?
Managing prescription medication benefits for insurers, employers, and other medical care program providers is the expertise of a PBM. To control medicine costs, they engage in negotiations with pharmaceutical producers and retail pharmacies as a component of the pharmaceutical supply chain. These experts also collaborate with insurers to define drug prices, which has an impact on patients’ access to financial services for medications as well as the revenues pharmacists get from clients who buy pharmaceuticals from their stores. They can assist consumers to save money by making prescription drugs more affordable and by creating insurance networks that facilitate patient access to pharmaceuticals.
What is a PBM used for?
A pharmaceutical benefits manager works for a corporation, healthcare plan provider, labor union, or other company that provides health insurance to its members and staff. They conduct negotiations with drug producers and handle claims for acquiring prescriptions. By making drugs accessible through insurance companies and retail pharmacies, they hope to support improved patient health outcomes. A pharmaceutical benefits manager’s regular duties include the following:
- Negotiating discounts
- Examining patient adherence
- Controlling and managing the network’s medication distribution
- Specialized pharmaceutical services
- Filing and processing claims
- Performing reviews of drug use
- Upkeep of formularies
What does a pharmaceutical benefits manager do?
pharmaceutical benefits managers’ primary goals are to curate the available pharmacy benefit plans and to make necessary pharmaceuticals more accessible and affordable for patients (also known as “plan participants”).
Goal 1: Lower spending
With a wide network of mail-order or retail pharmacies, pharmaceutical benefits managers bargain prices. pharmaceutical benefits managers can also purchase medications at a lower cost from manufacturers thanks to their size and consequent power. As a result, they may provide patients and businesses with more convenient access to drugs at comparable prices across various retail chains.
Goal 2: Boost the Availability of Medicine
Through direct negotiations with pharmaceutical producers or wholesalers, pharmacy benefits managers improve a patient’s access to pharmaceuticals. Pharmaceutical benefits managers bargain for bulk reductions from Wholesale Acquisition Costs (WAC) that they can then pass along to their customers. This indicates that patients can obtain coverage for a necessary medication at a lesser cost to the insurer and the plan member.
A pharmacy benefits manager can frequently advise businesses by offering suggestions on various pharmacy policy designs, clinical initiatives, and other topics.
It’s reasonable to compare the interaction between the pharmaceutical benefits manager, the drug maker, and the employer to a game of tug-of-war. To obtain a fair agreement for both sides and provide ways to reduce prescription benefit expenses, the pharmacy benefits manager serves as a go-between, connecting to both the producer and the company.
How do pharmaceutical manufacturers collaborate with a pharmacy benefits manager?
PBMs and pharmaceutical producers have a delicate relationship. It can be challenging to navigate and comprehend interactions between pharmaceutical firms and pharmaceutical benefits managers because of an assortment of financial issues. PBMs are in charge of establishing a drug’s affordability and placing plans in place to assist patients to obtain prescriptions and employing the best treatments since they act as a middleman between pharmaceutical firms and patients. These initiatives comprise:
1. Rebate schemes
PBMs bargain with drug manufacturers to establish the number of rebates the producer will give the PBM for particular medications. The manufacturer’s rebate may be passed to the employer in full, in part, or not at all by the pharmaceutical benefits manager, depending on the terms of the PBM contract between the employer and the pharmaceutical benefits manager.
2. Coverage of formularies
The list of branded and generic medications that are covered by a certain plan is called a drug formulary. PBMs compile the list with the help of doctors and other clinical specialists, making sure to include the most cost-efficient and effective medications. A drug is significantly more likely to be recommended by a doctor if it is included on the formulary, considering the number of prescriptions that pass through a pharmaceutical benefits manager. A pharmaceutical company would prefer to ensure that its medications are included in the formulary so that patients who need them can access them.
3. Programs for prior approval
A cost-saving provision of pharmacy benefit programs called prior authorization aids in ensuring the proper use of prescription medications. Previous approvals are intended to stop improper prescribing or use of specific medications. Pharmaceutical benefits managers identify particular classes of medications that demand prior authorization. Before the insurance agrees to fund the drug and permit the patient to start treatment after a prior authorization happens, the patient must first receive clearance from their carrier.
4. Step therapy applications
Step treatment programs are a kind of prior authorization system that covers both generic and brand-name medications. Before going on to a more expensive prescription, step therapy regimens are designed to ensure that patients have at least made an effort a less expensive medication that is beneficial for a particular illness. To save the employer money, pharmaceutical benefits managers frequently design step therapy programs that patients on their plans must follow.
Pharmaceutical benefits managers are also in charge of managing clinical pharmaceuticals, high-cost specialty prescriptions, and other crucial programs aimed at improving adherence and decreasing waste.
How do employers interact with a pharmaceutical benefits manager?
An employer often enters into a three-year agreement with a pharmaceutical benefits manager when hiring them to create and manage a pharmacy benefits program. To create their perfect pharmacy benefit package, both parties collaborate during the early exploration phase, sometimes with the assistance of brokers and industry experts. Selecting from various co-insurance, co-payments, deductibles, and therapeutic programs is part of this.
Following the creation of the plan, the employer depends on the pharmaceutical benefits manager to properly manage the prescription benefits and inform the employees of their coverage. PBMs often have contact centers for member support, where representatives can respond to inquiries about the in-network pharmacies or various co-payments for various medications. The majority of PBMs also provide websites or applications that make it simple to access details regarding eligibility, refills, prices, and coverage guidelines.
PBMs are accountable for the following four major parts of the agreement during the whole contract:
1. Processing claims
Within a pharmaceutical benefits plan, pharmaceutical benefits managers are in charge of processing and compensating claims for prescription medications.
2. Reimbursement of rebate
PBMs bargain rebate plans with pharmaceutical firms, as was already mentioned. The pharmaceutical benefits manager is in charge of managing these rebates even though there are numerous complex models for rebate programs. The rebate payment may be returned in full, in part, or not at all to the employer depending on the terms of the pharmaceutical benefits manager and the employer’s contract.
3. Clinical initiatives
Clinical programs are intended to support members of pharmacy benefit plans in achieving the best clinical results. PBMs continuously examine data and track medicine consumption to decide what changes need to be made to reach the core objective: maintaining, or enhancing, medical benefits while limiting costs.
Prior approval, quantity restrictions, and step therapy are just a few examples of clinical programs that have been put in place to guarantee that patients receive the best care possible in the best environment.
4. Drug use evaluation
PBMs are crucial to the safety of pharmacy benefit plans. A life-saving program called drug usage review mandates the evaluation of a drug to ascertain its efficacy, potential risks, and possible interactions with other drugs, and assuage other safety issues. Because PBMs manage their pharmacy systems, they possess access to a patient’s prescription record and can warn patients or doctors of any potential adverse medication interactions that might arise from combining different prescriptions.
Also, the pharmaceutical benefits manager establishes particular requirements that must be met before a certain medicine can be delivered. Verifying the diagnosis, figuring out whether there is a biological factor, making sure the appropriate testing is done, and using a professional during therapy are some examples of criteria. All of this is done to ensure that a patient is following the right procedures for treatment, isn’t surpassing the required quantity or dosage, and is effectively utilizing the medication.
Employers heavily rely on PBMs to provide them with data and trends about the effectiveness of their plan and recommendations for enhancement on the back end. To guarantee that their employees always receive the greatest care at the most affordable price, companies must keep constant communication with their pharmaceutical benefits managers.
Getting started as a pharmaceutical benefits manager (PBM)
The steps to becoming a pharmaceutical benefits manager are as follows:
1. Work towards a bachelor’s degree
To become a pharmaceutical benefits manager, you must first obtain a bachelor’s degree. PBMs are well-versed in the pharmaceutical sector. They frequently need to complete a high degree of education and accumulate years of professional experience before they are qualified for their positions. A solid initial step toward earning a professional pharmacy degree and beginning a pharmacy job is having a bachelor’s degree in a pertinent discipline. For instance, a lot of people who work in the pharmaceutical industry have degrees in chemistry, biology, global health, or a similar area of the life or health sciences.
You can prepare for doctoral-level study in these areas while earning your pharmacy degree by taking an undergraduate course in a healthcare-related field. You can build a solid knowledge base for your pharmacy profession by learning about chemical molecules and their impact on the human body. The typical time to earn one of these degrees is four years. Some college classes you might consider taking if you want to pursue a career in PBM are:
- Inorganic chemistry
- Biology
- Biology and anatomy
- Microbiology
- Statistics
- Healthcare ethics
2. Get a doctorate in pharmacy
Licensed pharmacists with PBM expertise are frequently preferred by companies. You can work as a pharmacist if you complete a Doctor of Pharmacy program and obtain a license. Doctor of Pharmacy programs typically last for four years to finish. With the help of these degrees, future pharmacists can create and prescribe drugs to treat a range of medical ailments. Students pursuing a doctorate in pharmacy may pursue the following courses:
- Chemical medicine
- Physiology of health and illness
- prescription drug calculations
- Pharmacology
- Clinical expertise Design and analysis of research
- Pharmacoeconomics
A doctorate in pharmacy will teach you about the pharmaceutical sector, the creation, and distribution of drugs in clinical settings, as well as the development and production of drugs. For a PBM to be effective, they must possess professional-level training in these fields. A Ph.D. in pharmacy equips PBMs with the expertise required to carry out their profession because they depend on their understanding of pharmaceutical manufacture, insurance laws, and client-facing marketing.
3. Get relevant work experience
PBMs frequently need to have significant field experience in addition to having completed a high level of technical education to be eligible for their positions. Many organizations like hiring pharmaceutical benefits managers with a minimum of at least five years of pharmacy experience and an extra 5 years of experience managing the pharmacies for health plans. PBMs can develop an in-depth understanding of pharmaceutical distributions and the sector’s economic chain through their extensive industry expertise. For high-quality consultations and discussions that advance the industry’s goals, it is crucial to comprehend how producers, insurance plan administrators, retail pharmacies, and client needs interact.
The Pharmaceutical Benefit Management (PBM) Industry: An Overview
Insurance is a multifaceted industry with many participants supporting a wide range of interests and objectives, just like other economic sectors. This indicates that other businesses in this sector exist in addition to insurance companies. In actuality, it also includes pharmaceutical benefit management firms, underwriters, and reinsurers.
PBMs are the middlemen because insurance providers depend on them to control expenses. PBMs take advantage of this position by negotiating drug maker discounts for insurance organizations in return for exposing the manufacturer’s products to millions of consumers. To build networks of drug stores for the distribution of drugs, these businesses also bargain contracts with pharmacies.
PBMs make use of various sources of income. They charge service fees, as an illustration, for
- Bargaining with drug producers, insurance providers, and pharmacies
- Preparing prescription drugs
- Running online pharmacies
A PBM’s prospects can be drastically altered by agreements with the biggest insurance providers, providing it a significant negotiating advantage over drug producers and pharmacies. So, it should not be surprising that there is intense competition, with pharmaceutical benefits managers competing to establish the strongest possible position for contract negotiations with insurance providers.
Unique Considerations
Drug prices have skyrocketed over the years, forcing insurance companies to significantly rely on PBMs to manage and lower their liability. As a result, there is now more competition between PBMs, which has led to industry consolidation. PBMs can grow in size and strengthen their negotiating position through mergers and acquisitions (M&A).
Due to the natural synergies between pharmacies and PBMs, M&A acquisitions amongst PBMs have also resulted in consolidation between them. In 2015, Rite Aid acquired EnvisionRX, and CVS Caremark has had easy accessibility to CVS’s network of retail pharmacies for a long time.
Pharmaceutical benefits managers pay
Annual compensation of $68,296 is typical for general benefits managers. Due to their particular expertise in incentives in the pharmaceutical sector, pharmacy benefits managers may receive more than average pay than generic benefits managers. PBMs may make more money than benefits managers who are employed in more general positions because they possess a significant amount of expertise in their profession and have spent decades accumulating intensive industry knowledge. A professional’s geographic location, place of employment, amount of education, and amount of experience can all affect their income.
For instance, many PBMs begin their professional lives by operating as contractors for businesses or manufacturers. They can demonstrate their expertise to their employer while acquiring skills relevant to their job in this role. After their probationary period, the employer may decide to recruit them for a full-time PBM position, which could come with benefits such as a pay raise and other perks. PBMs may also make more money as they gain expertise in the industry and manage fruitful negotiations that favor patients, healthcare plan administrators, retail pharmacies, and the drug industry.
The job outlook for PBM
Between 2020 and 2030, the U.S. Department of Labor Statistics predicts a 4% improvement in the job outlook for pay and benefits managers. These experts may be hired by companies and other entities to assist them in lowering benefit expenses while still meeting the demands of their employees. While some businesses might depend on their human resources division to bargain for benefit packages, others might recruit outside contractors in their areas of expertise. Because PBMs play a highly skilled role in benefits management, they might have a better outlook on the future of their careers.
Competencies for PBMs
To do their jobs effectively, PBMs require both interpersonal and technical abilities. These individuals may employ the following abilities in their roles:
- Negotiation: To establish equitable pharmaceutical pricing, PBMs engage in negotiations with drug makers, health insurance companies, and retail pharmacies. This ensures that patients can pay for their prescriptions while allowing pharmaceutical businesses to maintain their business strategies.
- Analytical thinking: Analytical thinking is the capacity to gather and evaluate data to make inferences and resolve issues. PBMs need to collaborate with many different parties and gather a lot of information so they can examine possibilities for fair pricing and provide clients with advice.
- Paying attention to the details: PBMs must pay close attention to detail to take into consideration the many variables that influence pharmaceutical pricing. To develop fair pricing recommendations, they employ this competence to evaluate economic issues, company tactics, and public health demands.
- Communication: As part of their duties, PBMs keep in constant contact with business executives, store managers, and insurance companies. They may offer practical solutions and comprehend the objectives of many stakeholders with the aid of effective communication.
What regulatory changes are being considered for PBMs?
To govern PBMS, policymakers have taken into account three main reforms:
- Higher rebate transparency requirements. More information on the rebates PBMs receive is probably needed by state and federal policymakers to fully comprehend pharmaceutical costs and identify potential reform areas.
- Interdict spread pricing. To prevent payers and businesses from overpaying PBMs for prescription medications, policymakers might outlaw the practice. A less expansive plan would require PBMs to amend their cost plans with pharmacies to account for price changes for generic medications.
- Demand that PBMs pass rebates on to payers or patients. PBMs might be compelled to provide payers 90% of their rebate savings to keep some of their motivation to bargain lower drug prices with drugmakers. As an alternative, PBMs could be forced to give refunds to patients. The federal government has suggested mandating that PBMs working with Medicare Part D plans to pass along at least one-third of the discounts and price breaks they obtain to patients.
According to several experts, PBMs also need to shift their focus from getting rebates to increasing the value of pharmaceutical spending. Health plans and PBMs, for instance, might do more to assist doctors in prescribing the most affordable drugs on their patient’s formularies. Moreover, PBMs could base price negotiations and formulary decisions on a drug’s health advantages as well as how it would affect the overall cost of patient safety.
What part do PBMs play in our prescription medication spending?
PBMs work in the center of the supply chain for prescription medications. That is a result of:
- Compile and manage lists of covered pharmaceuticals for health insurance, which impact which prescriptions people take and calculate out-of-pocket costs
- Utilize their buying authority to negotiate discounts and rebates from pharmaceutical makers
- Contract directly with private pharmacies to compensate beneficiaries for medications dispensed.
PBMs’ capacity to obtain bigger manufacturer rebates, according to research by the federal Medicaid and Medicare Services, has assisted in bringing down prescription costs and controlling the development of drug expenditure in the last three years. PBMs may, however, also be motivated to favor expensive medications over those that are more affordable. Because rebates are frequently paid as a percentage of the manufacturer’s asking price, PBMs frequently receive a higher refund for pricey pharmaceuticals than they do for those that would offer superior value for a lower price. As a result, those with high deductible plans or copays that are determined by the list price of a medicine may have greater out-of-pocket expenses.
Complaints against the PBM Industry
PBMs frequently become the subject of litigation and federal investigation, as implied by the nature of the industry itself. PBMs haven’t always revealed discounts, rebates, detailed invoicing statements, or the savings that are transferred to insurers because most of their business operations as third-party negotiators are unclear.
To properly regulate these businesses, state legislatures have pushed for stricter disclosure and transparency rules. Also, there have been calls for PBMs to be given a fiduciary duty that would obligate them to behave in the insurers’ and insurance plans’ best interests, much as how financial advisors are required by law to act in their client’s best interests. All of these point to potential PBM sector regulation that would have an impact on future profitability.
How to choose the ideal pharmaceutical benefits manager for your company
You can choose from hundreds of PBMs and cutting-edge vendors to manage your pharmacy benefit package. Yet, comparing offers from different PBMs to choose a provider who meets the demands of your demographic and helps your company save money might be challenging. To obtain the most advantageous PBM contract, it is essential to leverage a cutting-edge procurement marketplace that enables greater visibility into what PBMs are providing you. But buyer beware—you must make sure that your marketplace for procurement is completely transparent and isn’t connected to your favored PBMs or suppliers.
You can only be certain that you are obtaining the greatest price for your PBM by using a transparent procurement marketplace.
Conclusion
A PBM acts as a go-between for drug companies, pharmacies, and health insurance companies.
Formularies, or directories of authorized prescription drugs, are another thing that PBMs develop and maintain. According to the availability and price of a drug, a formulary is divided into distinct tiers.
Higher-tier medications, which may include specialty drugs, may cost more to consumers. If a brand-name drug has a generic equivalent, that prescription will be equally effective but typically come with a reduced copayment.
Frequently Asked Questions about pharmaceutical benefits manager
- What does PBM mean?
In essence, a pharmacy benefits manager, or PBM, serves as the go-between for all parties involved in the pharmacy benefits market.
- What function does PBM serve?
PBMs are third-party administrators of prescription drug programs who are generally in charge of processing and paying claims for prescription medications. They frequently contract with pharmacies, design and maintain the prescription formulary, and bargain prices and rebates with pharmaceutical manufacturers.
- The top three PBMs are who?
The list of medications that the three biggest pharmacy benefit managers (PBMs)—Caremark (CVS Health), Express Scripts (Cigna), and OptumRx (United Health Group)—exclude from their basic formularies has climbed once more for 2023. Currently, each exclusion list has 600 items on it.