frequently asked questions (faqS)

What does PBM stand for?

PBM is an acronym for Pharmacy Benefits Manager.

Why should I consider using a PBM?

Many employers have realized that they can attain significant savings by carving the prescription benefit out of their fully-insured health insurance plan. Prescription spending typically does not fluctuate drastically like medical spending. For this reason in many circumstances it is better to pay for prescriptions rather than pay for insurance to cover prescriptions. Once you decide to carve out prescription benefits a PBM could manage them for you.  Another path employers take is to self-insure rather fully-insure their health benefit program.  In this case they usually work with a broker and / or third party administrator who would assist them with contracting with the PBM.

What services might I expect from a PBM?

First a PBM would handle claims processing. When your employee shows up at the pharmacy to fill a prescription the pharmacy would enter the relevant data and send it to the PBM electronically. Almost instantly the PBM would verify the employee, that the drug is covered, and inform the pharmacy electronically what the employee's copay is. The PBM would pay the pharmacy and send you a bill (covering a set period). Part of the PBM's normal services would include contracting with pharmacies and negotiating volume pricing. A PBM might also recommend a formulary (list of covered drugs) to limit which drugs are used. Other services might include advising on copay strategies, clinical programs, customer service, mail order strategies, clinical programs, customer service, mail order programs, and negotiating rebates on brand-name drugs.

What should I consider when choosing a PBM?

PBM's are the hub for transactions of significant amounts of money. Since you, the employer will be paying, you need to know exactly how your money is being spent. PBM's will usually contract with you to provide your employees medicines at a particular rate; usually based on AWP (Average Wholesale Price). They will also likely charge you an administration fee per prescription. Since there are many other factors which may affect the bottom line, you should ask potential PBM's to provide you an analysis which shows net costs.