Pharmacy Benefit Managers: Why Your Prescription Costs What It Costs

What a PBM does

Pharmacy Benefit Managers manage the prescription drug benefit on behalf of insurance plans, employers, and government programs. They negotiate prices with drug manufacturers. They build the formularies that determine which medications are covered at which tier. They set the reimbursement rates pharmacies receive for filling prescriptions. They operate mail order pharmacies. They process the claims that flow between pharmacies and insurance companies.

The three largest PBMs control roughly 80 percent of the U.S. prescription market. Each is part of a larger healthcare conglomerate that also owns insurance plans and pharmacy chains.

How PBMs affect what you pay

The PBM determines which medications are on the formulary, at what tier, and what your copay is. Two patients with the same condition and the same diagnosis can end up on different medications because their insurance plans use different PBMs with different formularies. A medication that costs $10 at one plan can cost $200 at another, because the negotiated discounts and rebates differ.

Formularies change. Annually, sometimes mid year. The medication that was tier 1 last year may be tier 3 this year. The brand drug that was covered may be removed. Prior authorization requirements get added. The patient experience reflects PBM decisions far more than physician decisions or pharmacy decisions.

Why your independent pharmacy is squeezed

PBMs set the reimbursement rate the pharmacy receives for filling each prescription. For many generic medications, the reimbursement is below the pharmacy’s actual cost to acquire the drug. The pharmacy fills the prescription at a loss.

For independent pharmacies in Mississippi, this has been an existential pressure. Hundreds of independents have closed across the state over the past decade, with PBM reimbursement squeezes a major driver. Chain pharmacies can absorb the pressure longer because of scale. Independents often cannot.

The DIR fee system, which clawed back additional reimbursement after the fact, compounded the problem for years. Federal rule changes have started to address it, but the work is far from finished.

Why some patients are pushed to mail order

PBMs own mail order pharmacies. They have a financial interest in patients filling prescriptions through their mail order rather than through community pharmacies. Some plans require mail order for maintenance medications. Some require higher copays at retail pharmacies than at mail order. Some send aggressive marketing to patients to switch.

Mail order can work for some patients. For many, it does not. Lost prescriptions, temperature damaged medications, delays in shipping, and the absence of a pharmacist relationship are common complaints. Patients on chronic medications who switch to mail order often eventually switch back, particularly after one or two delivery problems.

What is changing

Several developments have started to shift the picture.

• Federal rules have begun to address some PBM practices including DIR fees and rebate transparency.
• Mississippi has passed state level legislation to protect independent pharmacies from certain PBM practices and to expand patient choice.
• Direct to consumer cash pay services have emerged that bypass the PBM system entirely for some generic medications.
• Some employer health plans are exploring alternative models that pass more value to patients and pharmacies.
• PBM business practices are receiving more scrutiny from Congress, the FTC, and state attorneys general.

What you can do

• Use one pharmacy for everything. The pharmacy that knows your full picture is your best advocate.
• Ask about pricing before filling expensive prescriptions. The pharmacist can often identify a cheaper alternative.
• Push back on mail order requirements when you prefer to use a community pharmacy. Many plans have appeal processes.
• Support state level pharmacy reform legislation. Mississippi has been more active than most states.
• Tell your employer or HR department if your prescription benefit is causing problems. Employers have more leverage with PBMs than individual patients.

Where pharmacy fits

We help Mississippi patients navigate the PBM system every day. We do price comparisons. We help identify therapeutic alternatives. We coordinate with prescribers when prior authorization is needed. We push back on coverage decisions when the clinical case is strong. None of this guarantees a particular outcome, but pharmacy advocacy makes a meaningful difference for most patients. Serving Hattiesburg, the Pine Belt, Central Mississippi, and South Mississippi.

When to call a pharmacist

• A medication you have been on is suddenly more expensive or no longer covered.
• You have received a notice from your insurance plan about formulary changes.
• You have been told you must switch to mail order and you prefer to stay at your community pharmacy.
• Your prescription requires prior authorization that has not yet been completed.
• You are choosing between insurance plans during open enrollment.

This article is for general information only and is not a substitute for personalized medical advice. Before starting or changing any medication, including over the counter products and supplements, talk with your pharmacist or physician about your specific situation.