Last week, we explored how pharmacy benefit managers (PBMs) take sky-high prescription drug prices and make those medications affordable for patients.     

Today, a simple question: If hiring a PBM is optional, why do nearly all employers and unions choose to use one? 

Here are some quick facts: 

• For every $1 an employer spends on PBM services, total costs drop by $10. 

• PBMs save employers and patients 40-50% on their annual drug and related medical costs. 

• 93% of employers are satisfied with their PBM’s ability to lower drug costs. 

• In a world without PBMs, employers would lose out on 40% of the total value of the services provided, costing them $58 billion more each year. 

So how do PBMs consistently deliver these cost-saving results? 

Negotiating Discounts from Big Drugmakers 

Big Pharma would like nothing more than for employers and patients to pay the high prices they set. Fortunately, employers have PBMs on their side, going head-to-head with drug companies and leveraging competition when it exists in the market to negotiate steep discounts. These manufacturer discounts – often coming in the form of rebates – are sent back to the employer, who can use them to reduce out-of-pocket costs and premiums for patients. Recently enacted PBM reform ensures 100% of rebates are passed through to employers.  

Managing Lists of Drugs Covered to Encourage Lower-Cost Options 

PBMs work with employers to design formularies – tiered lists of drugs that are evaluated by a group of clinicians to be safe, effective, and covered by the pharmacy benefit. The first tier on a formulary typically includes generics and lower-cost drugs. Real-time benefit tools help encourage doctors to prescribe tier one medications. By encouraging effective and lower cost therapies, employers pay less for their benefits and patients receive appropriate drugs for their condition and enjoy lower costs at the pharmacy counter.    

Building Broad, Affordable Pharmacy Networks 

Employers want broad pharmacy networks where employees can access their medication, regardless of where they live. They also want these pharmacies to be affordable and high-quality. PBMs design pharmacy networks that check all these boxes and help employers offer a range of choices to their employees, from big chains to independent pharmacies.  

Managing High-Cost Specialty Drugs 

PBMs also help manage expensive specialty medications. While only 2-3% of prescriptions filled are for specialty drugs, they account for over half of all drug spending. Employers, government programs, and patients spent over $100 billion on specialty oncology medications alone in one year. Some specialty pharmacies are affiliated with PBMs, but regardless all PBMs work closely with specialty pharmacies to ensure patients receive their drugs and the clinical care they need. 

Put simply, PBMs help employers and unions stretch every health care dollar further so employees and their families can access the medications they need at a lower cost.