Last year, Arkansas lawmakers debated the role pharmacy benefit managers, or PBMs, should play in the state’s health care system. PBMs negotiate rebates and price concessions from big drug companies and drugstores. Without them, managing health insurance plans would be too expensive for employers, the government and other payers.
Drug companies alone are responsible for setting the prices Arkansas consumers or their employers pay for prescription drugs. PBMs are able to negotiate price concessions, often through rebates, with drug companies when there is competition among brand name drugs and when manufacturers have an incentive to provide rebates. These rebates are then used to keep overall health care premiums more affordable for Arkansans. Look no further than the Medicare prescription drug program, Part D, as an example of this dynamic working extremely well on the federal level and for Arkansas’s senior citizens. In Part D, premiums have essentially remained flat, around $32, since the inception of the benefit more than 10 years ago.
PBMs are largely measured by their ability to reduce prescription drug costs. And the fact they successfully carry out this directive for the employers, public programs, unions and other health plans in Arkansas that hire them is not hard to figure out. But, having been involved as a clinician representing insurers and PBMs for more than 25 years, I know first-hand the importance of leveraging savings while ensuring patients receive their medications and the clinical support they need.
Management of drug formularies — the list of drugs covered by your health plans — is critical to improving the overall health of Arkansans. In this regard, PBMs do sophisticated drug assessments to create clinically safe and cost-effective formularies that promote the most appropriate use of complex medications and mainstay drugs, leading to better health outcomes overall.
In the design of a drug formulary, pharmacists, doctors and other professionals — employed by PBMs — review safety and effectiveness for every drug approved by the U.S. Food and Drug Administration. They help determine which drugs should be on a formulary, based on medical evidence, to help further lower costs and increase the quality of patient care.
In addition, PBMs are on the front lines working toward payment for value rather than volume. PBMs are providing expertise to payers by developing and executing outcomes-based contracts with pharmacies and drug companies to ensure our pharmaceutical dollars are spent on drugs and services that provide the best outcomes.
These agreements require a high level of sophistication about drug use patterns and patient outcomes, as well as the ability to monitor and improve patient compliance and measure relevant outcomes. PBMs are the best situated companies in the health care system to help achieve significant strides in value-based purchasing in the pharmaceutical market.
As the public debate in Arkansas continues to unfold on drug pricing issues and the role of PBMs in the health care system, it is vital to understand PBMs are an integral part of the solution that lower drug costs for patients, and ultimately health insurance premiums, while most importantly, helping improve patients’ health.
Editor’s note: Dr. Edmund Pezalla is a scholar-in-residence at the Duke-Margolis Center for Health Policy in Washington. The opinions expressed are those of the author.