A look at how prescription benefit managers work

AP News
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Posted: Jul 21, 2011 5:05 PM
A look at how prescription benefit managers work

What is a prescription benefits manager?

These companies, also called pharmacy benefits managers, serve as intermediaries between payers _ employers and other health plan sponsors _ and suppliers. Those include brand-name and generic drugmakers, drug wholesalers and retail pharmacies. Drug benefit managers design drug benefit plans, setting up formularies with different patient copayments for generics, preferred or less-expensive brand-name drugs and nonpreferred or more expensive brand-name drugs.

What do drug benefit managers do?

They make sure the members received their prescriptions, whether they are filled at retail pharmacies or through mail order pharmacies they operate _ mainly for ongoing prescriptions for chronic conditions. They provide the prescription cards used by pharmacies to process claims.

Their most important function is to hold down costs for the payers and the patients. They do so by negotiating discounts and rebates from drugmakers and wholesalers, through tiered copayments and other programs that boost use of cheaper generic drugs, by checking for dangerous drug interactions and by ensuring patients take their medicines as prescribed to prevent hospitalizations and other costly complications. They do that by tracking when prescriptions are renewed, and calling or emailing patients with reminders when they haven't filled prescriptions on time.

How do they make money?

Plan sponsors pay them for administering the plans, and they keep a percentage of the money saved. Contracts with payers give them a higher profit on generic drugs, an incentive that also saves the payers millions of dollars. Drug manufacturers also pay rebates to the prescription benefit managers, known as PBMs in the industry.