About the PBM Problem

Problems in
the Market

How PBMs
Affect Cost

Our Goals 

While PBMs market themselves as being well-positioned to bring savings to plans and consumers, a lack of transparency in their practices enables them to wield their power to increase their profits, often at the expense of the consumer.

Deceptive Tactics:
The National Community Pharmacists Association prepared a presentation (available here) detailing many common PBM practices that drive up health care costs. Some of the more prominent examples are:

• Classifying certain generic drugs as brand drugs and charging brand prices
• Promoting drugs based on the rebate the PBM obtains, not on the consumer's best interest. PBMs will prefer brands from which they get the highest rebate, even if there is an equally-well or better suited drug that is cheaper for the consumer. Sometimes PBMs will even switch patients' prescriptions without the knowledge of the patient, just so that the PBM can receive the rebate!
• Utilizing spread pricing by charging health plans more than they reimburse pharmacies, and pocketing the difference. (For more information on spread pricing click here)
• Using abusive audit practices and penalizing pharmacies for minor, typographical errors on claims, forcing them to forego reimbursement due to small errors that posed no consequence to the claim

How Transparent PBMs can Save Money:

• Transparent PBMs report all of their financial data, which means they are no longer able to charge significantly higher prices to health plans than the costs that they reimburse pharmacies in order to benefit from a pricing "spread"
• Similarly, transparent PBMs can't hide the rebates they receive from manufacturers--which means they don't promote expensive brand name drugs over equivalent generic drugs merely to profit from a rebate
• When rebates are obtained, transparent PBMs pass along the savings to health plans, rather than hiding it and pocketing the money themselves
• Nontransparent PBMs can use their mail-order pharmacies to repackage drugs and inflate their costs. Transparent PBMs--most of which don't own their own mail-order pharmacy--disclose their pricing data to employees and therefore don't attempt such deceptive behavior

Here is a resource published by PBS on how PBMs keep prescription costs high for patients.