What is a Pharmacy Benefit Manager (PBM) and Why Should You Care?

If you’ve ever wondered how pharmacy benefits are managed within health insurance plans, Pharmacy Benefit Managers (PBMs) are the key players behind the scenes. They play a central role in controlling costs, streamlining access to medications, and helping employers, employees, and health plans manage prescription benefits effectively. Here’s everything you need to know about PBMs, their role, and why it’s important.

What is a PBM?

A Pharmacy Benefit Manager, or PBM, is a company that works with health plans, employers, unions, and government programs to manage and administer prescription drug benefits. By handling everything from price negotiations with drug manufacturers to setting up pharmacy networks and managing claims, PBMs streamline the way people access and pay for prescription medications.

Why Are PBMs Important?

PBMs help control the cost of prescription medications, which can be a significant financial burden for both employers and individual plan members. Through their work, PBMs aim to make medications more affordable and accessible by negotiating lower drug prices and implementing strategies to control costs, which ultimately benefits employers, employees, and health plans alike.

What Do PBMs Do? Key Roles Explained

Here’s a look at the main roles PBMs play in the healthcare ecosystem:

1. Negotiating Drug Prices - PBMs negotiate with drug manufacturers to secure discounts on medications. These negotiations help lower the overall cost of drugs, which can reduce premiums and out-of-pocket expenses for members.
2. Formulary Management - A formulary is a list of prescription drugs covered by a health plan. PBMs use formularies to promote cost-effective options, such as generics or preferred brand-name medications, and manage drug expenses effectively.
3. Managing Pharmacy Networks - PBMs create pharmacy networks to ensure members have easy access to their prescriptions at competitive rates. By establishing agreements with a network of pharmacies, PBMs can negotiate better pricing for their members.
4. Processing Prescription Claims - PBMs handle the processing of millions of prescription claims, acting as the go-between for pharmacies, health plans, and drug manufacturers to ensure members receive their benefits.
5. Offering Clinical Programs - PBMs offer clinical programs to improve medication adherence and support patients with chronic conditions. These programs often include medication counseling, refill reminders, and other resources to help patients manage their health.

How Do PBMs Help Employers?

For employers, PBMs can be valuable partners in managing one of the top healthcare expenses: prescription medications. EVHC works with PBMs to provide insights into drug spending, offer solutions for specialty drug management, and help employees access the medications they need with minimal hassle.

Growth Through Transparency

EVHC self-funded plans provide valuable transparency in PBM operations for employers seeking clear insight into how pharmacy benefits are managed and costs allocated. Transparent PBMs provide detailed reporting and itemized costs, empowering employers to make informed decisions about their benefits plans. In today’s healthcare landscape, PBMs are essential for managing prescription benefits, negotiating competitive pricing, and helping employers deliver cost-effective options to their employees. Understanding how a PBM works, and its benefits can guide brokers, employers, and members in making informed choices, ultimately supporting healthier outcomes and financial sustainability.

If you’re ready to explore PBM options that work best for your group healthcare plan, EVHC is here to guide you every step of the way.

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