Dr. Lawton Robert Burns, a notable academic at the University of Pennsylvania Wharton School, provides a comprehensive analysis of Pharmacy Benefit Managers (PBMs) that underscores their integral role in the healthcare system, especially in managing costs. His research presents several insights:

Promotion of Competition

Dr. Burns highlights that PBMs are a competitive force in the healthcare industry. They encourage drug manufacturers to compete on pricing, which can lead to lower drug costs for consumers.

Negotiation for Lower Costs

Through strategic negotiations, PBMs are able to secure discounts and rebates from pharmaceutical companies. Dr. Burns points out that this negotiation process is essential in keeping medication costs down for payers and patients.

Influence on Drug Prices Through Formularies

PBMs use the formulary development process to drive competition among drug companies. By selecting which drugs are included, they can favor those offering the best value, thus incentivizing manufacturers to lower prices.

Efficiency and Scale

Dr. Burns notes that PBMs utilize their large-scale operations to negotiate better prices. This bulk negotiation does not involve the actual purchase of drugs but instead uses the power of pooled demand to achieve more favorable terms.

Quality Improvement

Beyond just focusing on costs, PBMs also employ various tools and programs to enhance the quality of care for patients. These include integrated pharmacy services such as mail-order pharmacy options, clinical oversight, and claims administration.

Mitigating Risk for Payers

By employing various pricing strategies like 'spread pricing', PBMs can mitigate financial risks for health plans, which is crucial for maintaining the economic stability of healthcare provision.

Dr. Burns' analysis is a rebuttal to the notion that PBMs contribute to the high costs of drugs. Instead, he asserts that their operations and strategies are fundamentally designed to exert downward pressure on drug prices, thereby playing a vital role in the cost structure of healthcare. This, in turn, benefits payers, including employers and unions, by preserving the sustainability of health benefits.

Learn more about PBMs

How PBMs lower costs

PBMs negotiate directly with drug manufacturers and pharmacies, utilizing formulary development, contracting tools, and bargaining power to reduce drug costs.

What are PBMs?

PBMs are companies that manage prescription drug benefits by negotiating directly with drug manufacturers and pharmacies. Their goals are to reduce drug costs and improve convenience and safety for consumers, health plans, and employers.

Demystifying PBMs

The operations of Pharmacy Benefit Managers (PBMs) are often perceived as opaque. In shedding light on common myths about PBMs, we aim to provide a clearer picture of their role in healthcare.