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Pharmacy Benefit Management (PBM)

Pharmacy Benefit Management (PBM)


Pharmacy benefit management companies, also known as pharmacy benefit managers (PBMs), play significant roles in both the nation’s healthcare delivery system and the health insurance industry. PBMs generally manage and administer the pharmacy benefit of group health plan sponsors, such as HMO plans, self-insured employers, indemnity plans, labor union plans, and plans covering public employees. On behalf of these health benefit plan sponsors, PBMs provide a variety of services that many industry experts believe result in cost-saving efficiencies for the plan sponsors and their members.

The PBM’s multifunctional role in the delivery and payment systems for prescription drugs has led some to characterize PBMs as the “middlemen” of the pharmaceutical industry. In this role, PBMs are facing ever-increasing scrutiny over what some critics consider to be unscrupulous business practices aimed solely at turning a profit in the midst of rising prescription drug costs for health benefit plan sponsors and their members. This public scrutiny has increased as PBMs have been given new business opportunities to provide their services to stand-alone prescription drug plans (PDPs) or to operate as PDPs themselves under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). Indeed, such scrutiny has led some to argue that PBMs should be held to higher standards as “fiduciaries” of the health benefit plans to which they provide services.

Excerpt from Thomas P. O’Donnell & Mark K. Fendler, Prescription or Proscription? The General Failure of Attempts to Litigate and Legislate Against PBMs as “Fiduciaries,” and the Role of Market Force Allowing PBMs to Contain Private-Sector Prescription Drug Prices, 40 J. HEALTH L. 205 (2007).