Drug Costs

What Is A PBM?

April 11, 2019 7:59 am

The U.S. Senate Finance Committee heard from five pharmacy benefit managers (PBMs): Dr. Steve Miller of Cigna Corporation; Derica Rice of CVS Health and CVS Caremark; William Fleming of Humana Inc.; John Prince of OptumRx; and Mike Kolar of Prime Therapeutics. Since “pharmacy benefit manager” is not yet a household phrase, we thought a short overview of what role these companies play in the pharmaceutical supply chain might be helpful.


The Motley Fool has one of the most decipherable definitions. A PBM, the website explains, is “a third-party administrator of prescription-drug programs for end payers, such as private insurers, and Medicare Part D plans.” This role is why PBMs are often referred to as “middlemen” – they come between health insurers and drug manufacturers in the supply chain.


Their practices, though, have a huge impact on patients. The Motley Fool also explains that, “PBMs dictate which drugs consumers can receive from their plan without incurring additional out-of-pocket costs.”


Also a simple definition, but here is what it means in real life. In an April 8 story in The Atlantic, Olga Khazan relayed Lynn Lear’s experience with a PBM in her quest to take advantage of a new treatment for breast cancer. The PBM used a policy called “prior authorization” to deny the treatment to Lear.


Under prior authorization, the PBM questions a patient’s doctor “before they will release medications to patients.” That seems reasonable, but the mechanism can be used to deny a treatment that the doctor recommends, which is what happened to Lear.


Eventually, Lear got the medication, but it took the physician’s office more than 16 cumulative hours on the phone over two months to get the treatment into Lear’s hands.


Stanford professor Kevin Schulman told The Atlantic’s Khazan that these delays happen because there is “no downside” for PBMs. They will not be held “responsible for the poor care the patient is getting,” Schulman explained.


Khazan also talked to Ted Okon, executive director of the Community Oncology Alliance, a group of cancer doctors, who “hates pharmacy benefit managers” because they “gum up the process, they argue, through prior authorizations and the use of inaccessible specialty pharmacies.” Okon also explained that PBMs use step therapy, which forces patients to try certain drugs even if their physicians don’t recommend them.


As The Motley Fool explains, PBMs also make decisions about what medications go on insurance company formularies, and often exclude, or threaten to exclude, certain drugs. According to AISHealth, this year Express Scripts excluded 48 drugs from its national preferred formulary, including a hepatitis C drug and one to treat HIV. Meanwhile, CVS Health and OptumRx cut 23 and 36 medications from their 2019 formularies, respectively. According to a 2018 STAT article, PBMs even have started to exclude drugs for rare diseases, including for chronic myelogenous leukemia and hemophilia.


All of these issues are on top of the fact that, as this blog has pointed out here, here and here, PBMs pocket drug manufacturer rebates that should go to consumers.


Tuesday’s hearing lasted roughly three hours but didn’t receive nearly the same level of attention as the hearing with drug manufacturers. Given PBMs’ outsized role in the pharmaceutical supply chain – and patients’ lives – we hope lawmakers will ask them back.