1. What does a pharmacy benefit manager (PBM) do and how do they operate?
Pharmacy Benefit Managers (PBM) performs the function of administering plans for
drugs prescription for the Americans with health insurance covers from sponsors such as
Medicare Part D plans, state government employee plans as well as Federal Employees Health
Benefits Program among others. PBMs make money through service fees from major drug
contracts, negotiation with pharmacies and drug manufacturers. The agreements may include
incentives to reduce costs. Correspondingly, use of a comprehensive generic program can
significantly reduce the drugs cost as well as giving control over the site and play essential roles
to improve patient outcomes. Pharmacy Benefit Managers operate through the following ways:
To begin with, The Average Wholesale Price is the regular price by national
pharmaceutical wholesalers for a product. Concisely, price changes are either published weekly
and in other cases on daily basis. Comprehensively, discounts received after selling prescription
drugs are usually contracted and vary depending on the market share calculated from the use of
drugs. PBMs regularly negotiate allowances with branded pharmaceutical companies.
Secondly, Maximum Allowable Cost (MAC): This is the basis on which the government
agency or PBM use for pricing of generic drugs. The MAC list is becoming increasingly
important as employees use generics to reduce prices. Currently, up to 50% of the volume of
drugs prescribed by some employers is generic. Generally, if an employer does not pay attention
when analyzing the MAC offers of a PBM, hidden costs may occur.
Additionally, PBMs use dispensing Fees. This includes fees waged to the pharmacy by
completing the prescription and handling the claim. The percentage of deliveries varies
significantly depending on the PBM offering. On the other hand, administrative posts that
PHARMACY BENEFIT MANAGEMENT
involve the fees charged by the PBM for the credit processing, the provision of necessary
reports, and analysis of the use as well as management of the general accounts. The other tool
that is used is the Cost-based PBMs, which are used to determine the cost of generic drugs. It is
calculated by a national data company, which calculates the average purchase price of a large
number of wholesalers.
2. The argument by Philipson, Mozaffari is true because the pharmacy management benefit
is only focused on controlling the prices of drugs rather than looking for ways for
valuable savings. Their some circumstances where someone can have a high medical
cost, and this thus forces the employer or beneficiary to pay a higher amount of money.
They should come up with a scheme that could save money for patients in a way that in
case he/she falls sick they can use the money without having to pay extra cash. They
should look for a permanent plan that covers patients that suffer from a terminal disease
that need rehospitalization.
a. What are some of the goals and performance metrics for pharmacy benefit
The primary goal of the PBM is to reduce the amount used in pharmaceutical drugs within the
prescription plans and to assist the patients in achieving better health. They also offer clinical
programs such as step therapy, quantity edits, and prior authorizations, which help employee
benefits plans. Generally, the program's objective is to help employers by recommending
different planning designs. On the other hand, the PBMs program strives to create competitive
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pricing. The following are some of the metrics for measuring performance: per member per
month cost of High-cost therapeutic categories, the entire program, specific drugs within
therapeutic categories. However, excessive control of cost results in higher medical costs,
inferior patient outcomes, and low-value pharmaceutical benefits. As part of their development,
PBM is not just administrators, but strive to provide new services that save money for customers.
This includes improving adherence to patient medication, improving drug application and drug
innovation through diagnosis and comparative effectiveness. In addition, they help reduce the
cost of special drugs and dominate the increasingly complex government bureaucracy. A
managed module approach should include a system for quickly and accurately identifying
module exceptions due to medical needs. Nevertheless, automated expenses may also help
identify inappropriate doses or medications for specific individuals that may be harmful or at
b. Do you think pharmacy benefit managers are sufficiently incentivized to lower
medical benefit costs? Why or why not?
The pharmacy benefit managers are sufficiently incentivized to lower the cost because they get a
service fee through the program. They encourage competition between pharmaceutical
companies through the offering of the same drug at different prices. Without PBM the pricing of
drugs could have been uncontrollable and are advantageous since they act as intermediaries.
They exclusively look for a fair price that can be both valuable to the other medical stakeholders.
They have tools or metrics to measure the cost if it is fair for all insured people. Basically, with
the rise in the cost of living, drug prescription cost could be expected to rise. Concisely, the role
of the pharmacy benefit managers checks and reduces the prescription cost of drugs. In future,
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the PBM will have additional tasks that will include checking on the quality of drugs to suit
health complications of the user among others.