If you work in the pharmaceutical or insurance industries--like we do--you are going to need to interact with pharmacy benefit managers (PBMs). In fact, we strongly recommend that you--and all of our customers--understand the role pharmacy benefit managers play in the prices you'll pay for prescription medications.
The pharmaceutical industry is growing rapidly. By the end of the year, the market is expected to reach $497 billion. As the demand for prescription drugs rises, insurance providers and end consumers are going to need more leverage to curtail rising drug prices. Pharmacy benefit managers are a group of professionals that play an important role here.
What Are Pharmacy Benefit Managers?
A pharmacy benefit manager is an intermediary between drug companies and insurers and consumers. They create prescription drug plans, ensure compliance, and bargain for lower prices. You need to understand their role when you consider various private insurancepolicies, including Medicare Part D.
What Are the Responsibilities of Pharmacy Benefit Managers?
Pharmacy benefit managers look out for the needs of end consumers, as well as insurance companies. You should know what their duties and benefits are if you work with them. They have a variety of responsibilities, which include:
- They negotiate rebates on behalf of consumers, Medicare Part D plans, and private insurers. You might find that they make drugs more affordable.
- You will find that they develop an efficient supply-chain network. They make sure drugs are delivered from drug providers to both pharmacies and end consumers. Pharmacy benefit managers usually oversee drug mail orders, which make sure that drugs are delivered directly to a patient’s doors.
- You can work with PMBs to oversee patient compliance. They monitor drug consumption to make sure patients are taking drugs as prescribed. This is especially important if patients are taking opiates or other drugs with a high risk of addiction or abuse.
- They process drug claims on behalf of both consumers and pharmacies.
- They select the drugs that insurers may cover (this list is known as a formulary). They make sure that this list is readily available to the consumers, so they know what medications are covered under their health plan.
PMBs offer several benefits through these services. Although the exact impact of PMBs on drug prices is still up for debate, insurance companies argue that they help keep drug costs down for consumers. PMBs also make it easier for pharmacists and physicians to identify warning signs that a patient may be developing an addiction to a controlled drug. If you have a lot of patients taking these types of drugs, this can minimize the risk of opiate abuse and reduce liability for healthcare providers.
How Large is the PMB Market?
While working for an insurance company or pharmacy, you can benefit from the sheer size fo of a PMB. They have more leverage than your company would while negotiating with drug companies. They can also establish compliance policies that you would have difficulty enforcing on your own.
Pharmacy benefit managers play a vital role in medication management. More pharmacies and health networks are turning to them, so they have a lot of leverage over drug companies.
The global market for PMBs was $407 billion in 2017 and is growing at AGR of 5.4%. The market is also highly consolidated. The three largest PMBs account for about 70% of all volume.
A lot of factors can affect the future of the PMB market, such as new healthcare reform initiatives. However, it looks like the demand for PMBs is going to be strong for the foreseeable future.
What Do Pharmacies and Health Insurers Take into Consideration When Choosing a PMB?
Pharmacies and healthcare companies look at a variety of factors when they select a pharmacy benefit manager. One of the most important variables they look at is the size of the company. Larger PMBs have a lot more leverage so that they can negotiate better rebates from drug companies.
They may also look at ancillary services that a PMB may provide. For example, pharmaceutical companies sell over $125 million worth of orphan drugs every year. Due to the fragmented nature of the orphan drug market, it can be challenging to manage their distribution. Some PMBs help oversee the formularies, distribution, and compliance of orphan drugs.
Healthcare companies also look at the cost savings PMBs provide. Some PMBs pass the rebates onto their customers, while others keep the savings for themselves.
PMBs Offer Valuable Services to Consumers and Healthcare Providers
You can benefit from working with pharmacy benefit managers because they play an essential role in the management of prescription drugs. They work closely with insurers and pharmacies to regulate prices and ensure compliance. To learn more about pharmacy benefit managers, get in touch with our VillaNova Insurance Partners team today.