Barak Richman: The Pharmaceutical Benefits Market is Changing

Pharmaceutical benefit managers (PBMs) play an important but largely hidden role in administrating prescription drug benefits. They have profited immensely as intermediaries, obtaining fees from employers and insurers for administering benefits while receiving rebates from manufacturers for marketing their drugs.

This PBM business model might change as health insurers have begun acquiring PBMs. Or it might not.

When PBMs are integrated with health insurers, they might weigh the totality of healthcare costs, rather than considering pharmaceutical benefits in isolation from medical and hospital benefits, and thus could direct patients towards high value, efficient care. Integration might also lead to holistic assessments of the costs and benefits of particular drugs rather than on profits from rebates. In short, it might mean the end to an intermediary model that profits from distortions from both sides of the pharmaceutical distribution chain.

But it might instead mean that insurers are mere feeders into the current PBM business model. Patient populations might be locked into each PBM business, and health insurers without a PBM might be at a disadvantage in the benefits market, which could drive to higher prescription drug prices for consumers. These problems would only get worse as PBMs pursue the lucrative specialty pharmaceutical market.

In short, the changing PBM market is something we all should watch. The coming PBM acquisitions bring us to a meaningful inflection point in the health sector.

Read More in “The Evolving Pharmaceutical Benefits Market” Health Affairs

Shulman, K., & Richman, B. (2018) The Evolving Pharmaceutical Benefits Market. JAMA, 319(22):2269-2270. doi:10.1001/jama.2018.4269