PBM Toolkit - Understanding What a PBM Does

What is a PBM?

PBM stands for Pharmacy Benefit Manager

PBMs are organizations that support the administrative and information system needs of managing prescription drug benefits for health plans, employers, union groups, third-party administrators, and other plan sponsors

• maintains eligibility
• adjudicates prescription claims
• provides clinical services and customer support
• contracts with and manages pharmacy networks
• provides management reports
• other services and programs may also be offered

What is the Value of the PBM Services Offered?

With the increased use and costs of prescription drugs, the role of the PBM is to ensure appropriate and cost-effective use of prescription medications. PBMs focus on managing drug cost spend, reducing inappropriate utilization, encouraging patient drug adherence and persistence, negotiating for lower drug acquisition cost, and improving clinical outcomes. PBM services are designed to ensure that the right person, gets the right drug, at the right cost.

What is the Evolution of PBMs?

PBMs were originally established to manage the large number of pharmacy claims processed by health insurers. Initially paper claims were processed, but electronic processing soon became standard practice. Over time, PBMs have grown by adding services. Today, PBMs are full service drug cost management organizations which hold a position of power in the industry.

How Do I Understand all the Terminology in the PBM Industry?

To help you navigate the complex PBM industry's terminology, please refer to the Pharmacy Benefit Managment Institute's Drug Benefit Glossary