What do PBMs do?

PBMs negotiate discounts and rebates with drug manufacturers to "reduce" drug costs for health plans (health insurance companies).  But these savings often fail to trickle down to patients, who may still face high out-of-pocket costs.  Local pharmacies are also harmed when PBMs keep a larger share of the negotiated discounts, cutting into already thin, or sometimes negative profit margins.

PBMs also create drug formularies (which drugs are covered so you don't have to pay cash) to ensure patients receive effective medications while controlling costs.  Unfortunately, these formularies can favor higher-rebate drugs that maximize PBM profits, potentially steering patients away from more affordable or effective medications.

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How do PBMs interact with pharmacies?

PBMs manage the claims process for prescriptions filled at pharmacies.  When a patient fills a prescription, PBMs determine drug availability under the patient's health plan and the reimbursement amount they will pay the pharmacy for purchasing and dispensing the drug.  PBMs often take advantage of this interaction by reimbursing locally operated pharmacies at unsustainably low rates, sometimes less that the cost of the drug the pharmacy purchased for the patient.  In addition PBMs will charge the health plans significantly more for the same prescription.  This practice is referred to or known as "spread pricing" and allows the PBMs to pocket the difference, putting local pharmacies at a financial disadvantage.  

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Why have other states created PBM reform laws?

Despite the intended purpose of PBMs, unfortunately profits over patient care occurs through:

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1. Lack of Transparency:  Opaque pricing and rebate systems.  PBMs don't reveal how they determine drug prices or reimbursements to pharmacies.  

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2. High Out-of-Pocket Costs: Patients often don't see the savings from PBM-negotiated discounts.

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3. Major Conflict of Interest: PBMs frequently prioritize their own mail-order or retail pharmacies over local competitors by "STEERING" PATIENTS TO THEIR OWN OUTLETS AND PROVIDING BETTER REIMBURSEMENT RATES TO THEIR AFFILIATED PHARMACIES.  This practice severely creates a disadvantage to locally operated pharmacies that are unaffiliated with the PBMs, further creating an unfair playing field and removing the patients freedom to chose where they want to fill their prescriptions.

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4. Threats to Local Pharmacies: By intentionally reimbursing lower rates to local pharmacies, it forces these pharmacies to cut employee hours, layoff staff, and in some cases creates store closures which can create pharmacy deserts in certain regions.  It is hard to think of another business that could survive when they are reimbursed LESS for a product than what they purchased the product for.  

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5. Unsustainable Reimbursements: PBMs often reimburses pharmacies below the cost of acquiring the medication, threatening their financial stability.  

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6. Spread Pricing: PBMs charge health plans more for medications than they reimburse pharmacies, keeping the difference as profit.

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7. Patient Steering: PBMs push patients toward their own mail-order or affiliated pharmacies, intentionally reducing business for local pharmacies, and removing the patients ability to chose a pharmacy of their choice.  

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8. Administrative Burdens: Complex audits and "clawbacks" consume resources and time, adding stress to local pharmacies.  *Clawback = a contractual provision, which can't be negotiated by the local pharmacy, which allows the PBM to reclaim money that has already been paid out to pharmacies.  

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What impact do PBM practices have on patients?

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1. Loss of Access: Local pharmacies often close due to PBM practices, leaving rural and underserved areas without access to medications.  Additionally, access is lost to pharmacies a patient intentionally selected due to proximity to their home, friendlier staff, or quicker service due to PBM steering.  

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2. Higher Costs: PBM pricing practices can lead to increased out-of-pocket costs for patients and/or employers.

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3. Reduced Services: Closures of local pharmacies eliminate access to personalized care, compounding services, same-day delivery, and other critical services.

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4. Erosion of Trust: Patients lose confidence in the system when profit-driven PBM practices take precedence over community needs.