Pharmacy Benefit Managers (PBMs) function as intermediaries between insurance providers and pharmaceutical manufacturers. PBMs create formularies, negotiate rebates with manufacturers, process claims, create pharmacy networks, review drug utilization, and more.
In 2023, California Attorney General Rob Bonta recently sued PBMs CVS Caremark, Express Scripts, and Optum Rx, and manufacturers’ Eli Lilly, Novo Nordisk, and Sanofi (producers of more than 90% of the global insulin supply) for allegedly using their market power to hike up the cost of insulin. Also, the state of Ohio is suing Express Scripts and Prime Therapeutics, accusing them of using Ascent Health Services (Cigna Express Scripts buying group) to illegally drive up drug prices.
Introduced in January 2023 by Sens. Maria Cantwell (D-Wash.), Chair of the Commerce Committee, and Chuck Grassley (R-Iowa), the bipartisan Pharmacy Benefit Manager Transparency Act (S.127) focuses on increasing transparency in prescription drug pricing.
The top three PBMs are vertically integrated with the largest health insurers in the country: Cigna owns Express Scripts; CVS, which merged with insurer Aetna in 2018, owns Caremark; and UnitedHealth Group owns Optum Rx. As drug prices increased, the market leading PBMs could negotiate the largest discounts, increasing their leverage through consolidation.
PBMs are also encountering competition from new pharmacy players, such as Mark Cuban Cost Plus Drugs, and a number of other non-traditional market participants. Many of these companies are focused on providing transparency in pricing models.
AMI’s 2023-2024 PBM Review profiles more than 60 PBM companies. The report identifies and segments the market into Market Leaders, Mid-Market PBMs, and Non-Traditional PBMs. AMI’s report also provides a brief background on the market.
Takeway: The increase in drug prices has increased the attention on PBMs, and the role they play in drug pricing, both at the federal and state levels