How pharmacy benefit managers influence drug pricing

The point of prescription drugs is to help people improve their quality of life. When a doctor writes a prescription and sends it along to the pharmacy, oftentimes they’re more focused on the drug’s effectiveness than its cost.

But when a patient picks up that drug, the price they will be asked to pay at the counter takes center stage — and it depends on a complex combination of factors. Is it a brand-name or a generic drug? Does the patient have health insurance? If so, does that insurance cover the drug?

Also, how do health insurers decide which drugs to cover, and what amount they’ll cover?

We answer all of these questions in Part 2 of this series. The video outlines what pharmacy benefit managers, or PBMs, are; how formularies and rebates work; and how PBMs use them to mediate with drugmakers, health insurers, and pharmacies in ways that influence the cost of drugs.

More from STAT:

ABOUT STAT:
Founded in 2015, STAT is a global digital media brand that focuses on delivering fast, deep, and tough-minded journalism about the life sciences industries to over six million monthly site visitors and an additional 20 million readers on the Apple News app. STAT takes you inside academic labs, biotech boardrooms, and political backrooms, casting a critical eye on scientific discoveries, scrutinizing corporate strategies, and chronicling the roiling battles for talent, money, and market share. With an award-winning newsroom, STAT provides indispensable insights and exclusive stories on the technologies, personalities, power brokers, and political forces driving massive changes in the life sciences industry — and a revolution in human health.

[doctorjules]

this is a helpful overview. this isn't taught in med school/residency but affects all our patients.

[kyfirearms]

PBM profits are in the Billions, pharmacies are going out of business, and patients can’t afford their medications.

[lisap]

Is there any data to support the argument that innovation decreases if prices are controlled? Can we use historical or regional variation in innovation to support this claim?

[surfsunskin]

great video! can i ask how you animate/edit these videos? thanks

[ericbond]

Healthcare needs overhauled. It is a racket to grab as much $$ from Senior Citizens.

[Laurilly]

From a pharma insider who negotiates these on a daily basis…if you want a branded drug to either be tier 1 or tier 2 you are looking at a rebate of 80-85%.

Say the drugs WAC (list price) is: $1000

To be a tier 2 with no restrictions (meaning no prior authorization and no step therapy), the rebate would be: $800-$850

Then you have to take out distribution fees: ~10% ($100)

Then you have co-pay card buy downs, any prompt pay, COGs, etc.

Sound like there is little to nothing left? That’s because the margins are truly that small.

Nevermind the fact that as a manufacturer you paid $1billion to develop the drug and only have ~7 years or exclusivity to make that money back.

[dhagos]

Only in the us?... we have pbm in Canada. They typically lower drug costs here 🫠