What are Pharmacy Benefit Managers and how do they make drugs more expensive?

September 22, 2018 4:37 pm
Pharmacy benefit managers (PBMs) are administrative middlemen hired by insurers and health systems to negotiate rebates on drug prices from manufacturers. In theory, PBMs are supposed to pass these negotiated savings onto consumers and patients. But in reality, many PBMs pocket large chunks of these rebates as profits. Industry analysts can’t be sure how much PBMs take away from patients because they rely on a complex and secretive negotiating process. But there are some examples. According to a recent study, a PBM purchased a generic version of Novartis’ cancer drug Gleevec for $84 a pill and later sold the same pill to Indiana’s Medicaid program for $300. In another instance, a New Jersey Hospital system found out that their PBM was increasing costs on every prescription they filled by between $5 and $65. In one year, this cost the Hospital system over $1.3 million. PBMs promise that they provide savings for patients and insurers through negotiation, but in reality, their business model relies on a lack of transparency.