Pharmacy Benefit Management

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A Pharmacy Benefit Manager (PBM) is a third party administrator of prescription drug programs. They primarily are responsible for processing and paying prescription drug claims. They also are responsible for developing and maintaining the formulary, contract with pharmacies, and negotiate discounts and rebates with drug manufacturers.

Due to their larger purchasing pool for prescription drugs, PBM's can negotiate rebates and discounts on behalf of their clients.

PBM's also often have the ability to offer initiatives that give value and flexibility to participants, such as tablet splitting, sampling and mail order service.

From an organizational perspective, PBM's can be "captive", in that they are part of a larger organizational pharmacy or buyer, such as Pharmacare (which is captive to CVS) and Walgreens Health Services (which is captive to Walgreens), or they can be independent entities, such as Medco.

From a strategic perspective, PBM's can be "carved-out", in that they were hired directly by an employee's company to provide PBM services, or "carved-in", in that they were hired be an employee's company through a MCO or HMO.

Many PBM's are currently working towards establishing Consumer Directed Health plans, which are essentially health savings accounts, in an attempt to shift the awareness of drug purchases to the customer.