Pharmacy Benefit Manager

A pharmacy benefit manager (PBM) is a company that administers, or handles, the drug benefit program for your employer or health plan.

PBMs process and pay prescription drug claims and are responsible for creating and updating your health plan’s drug formulary.

Because these companies can buy medications in large quantities directly from the drug companies, they are able to offer you discounts in mail order medications.

PBM Is a Middleman

Probably the best way to think about a PBM is as a middleman. A middleman who helps your employer get you medical services and prescription medications.

According to Anthem:

"A Pharmacy Benefit Manager, or PBM, is an organization that provides programs and services designed to help maximize drug effectiveness and contain drug expenditures by appropriately influencing the behaviors of prescribing physicians, pharmacists, and members."

Responsibilities of PBMs

It takes a lot of logistical work to get your medications to you. For expedience, a PBM must fulfill several responsibilities including the following:

• negotiate rebates
• operate mail order
• oversee patient compliance
• perform drug utilization reviews
• process claims
• maintain formularies
• manage distribution among a network of pharmacies
• provide specialty pharmacy services

As you can see, PBMs have a myriad of responsibilities that facilitate your care.

Example of PBMs: CVS/caremark

One of the largest PBMs in the country is CVS/caremark (part of CVS Health).

According to the CVS/caremark website:

"Whether plan members access their prescriptions by mail or in one of our national network’s more than 68,000 retail pharmacies, we provide the service and support needed to make sure the process goes smoothly.

"We work with employers, health insurance companies, the government, and other health benefit program sponsors to design and administer prescription coverage plans. This includes formulary management, discounted drug purchase arrangements, and clinical services and health care interventions."

How a PBM, Clinic, Pharmacy and Tobacco Retailer Coexisted

CVS Health is a huge company, which consists of 7,800 pharmacies and 1,000 mini-clinics as well as PBMs. Isn't it ironic that a pharmacy and clinic, which is supposed to keep people healthy, sells tobacco products, too?

In a 2015 TEDx talk, Larry Merlo, the CEO of CVS Health, claims that this contradiction motivated CVS Health to make a change and stop selling tobacco products in their pharmacies in February 2014.

By ceasing tobacco sales, Merlo says that his company has "walked away" from $2 billion in sales. Merlo believes that by limiting access to tobacco products, people will smoke less and cites data to support this prediction. According to Merlo, in the months after CVS quit selling tobacco products, it saw a million people who want to quit smoking in its clinics and has set up a large smoking cessation program. Furthermore, this decision to quit selling tobacco products didn't impact sales.

Content edited by Naveed Saleh, MD, MS.