Dear Ally, I am hearing a lot about PBM’s. What is a PBM?
A PBM is a Pharmacy Benefit Manager. PBMs are third-party administrators contracted by health plans, large employers, unions and government entities to manage prescription drug benefits programs. They were created in the 1960s to process claims for insurance companies. By the 1970s, PBMs were serving as fiscal intermediaries adjudicating prescription drug claims.
Today, PBMs not only adjudicate claims but also develop and manage pharmacy networks, determine drug formularies, set co-pays, and set criteria for prior authorizations and the patient’s choice of pharmacy. Originally intended to process claims on behalf of clients within a set fee structure, they are often called “invisible middleman” because they are hidden between the patient’s insurance company, who the PBM works for, and the pharmacy, who the PBM reimburses for dispensing the prescription. Currently the three largest PBMs – CVS Caremark, Express Scripts and OptumRx (a division of United Healthcare) hold nearly 80% of the prescription benefits market in the U.S.
