June 21st, 2024 – Pharmacy Benefits Managers, better known as PBM’s, are a little understood middleman that impact the cost of  employers’ health insurance and how employees receive their prescription medications.

PBM’s process about 80% of all prescriptions in America. There are 3 very powerful PBM’s that work with the majority of employer and individual health insurance plans: Express Scripts, Optum Rx and CVS Caremark, who are owned by Cigna, UnitedHealthcare and CVS respectively.

The PBM is who creates the formulary of what medications are and are not covered by a health insurance plan.  PBM’s also sometimes require employees try lower cost medications before approving more expensive medications, a process commonly known as step therapy.

While PBM’s point the finger at drug manufacturers as the blame for high drug costs, they have a hand in it as well.  PBM’s are supposed to help manage drug care costs, but PBM’s sometimes charge multiples more than the wholesale cost of medications and keep the difference.

Because there is little transparency, employers with fully insured and self-funded plans have little idea how great the markups might be. The PBM that an employer’s fully insured plan uses is selected by the carrier, so fully insured employers have little choice over PBM unless they’re willing to change health insurance carriers.

PBM’s are most likely to blame when people discover that it costs more to get a medication with insurance than by using a discount program like GoodRx or Cost Plus Drugs Company.