No employer or health plan sponsor is required to use a pharmacy benefit manager (PBM), but the vast majority voluntarily choose to because of the value and savings they deliver, including:
- Negotiating price concessions from manufacturers and pharmacies
- Building affordable pharmacy networks for enrollees
- Managing the drug formularies that plan sponsors have designed and chosen
- Providing clinical services for patients
- Processing and adjudicating pharmacy claims.
Employers, unions, and other health plan sponsors choose how to compensate their PBM for the services and programs provided.
One choice is to allow PBMs to keep a portion of the rebates and discounts they negotiate from drug companies as compensation. Health plan sponsors, including employers and labor unions, can also choose to retain the negotiated rebates by asking their PBM to pass through to them 100 percent of the rebates. In fact, a recent report from Dr. Dennis Carlton, Professor of Economics Emeritus at the University of Chicago and former chief economist at the U.S. Department of Justice (DOJ) Antitrust Division, found that PBMs pass back nearly 100 percent of rebates to health plan sponsors. In these contracts, payers typically choose to compensate their PBMs via fees.
PBMs are working to preserve the choices that employers, unions, and other health plans have – and value – to decide how they want to compensate their PBM.
Small employers have a variety of options in the type of compensation contracts they can choose, and often make different choices than large employers. In 2022, less than half of small employers chose a 100 percent rebate pass-through contract, while 44 percent chose for their PBM to retain some of the rebates. Small employers take advantage of the opportunity to choose the pharmacy benefit contract that works best for them and their employees.
See full infographic HERE.
Additionally, small business owners who rely on PBMs to keep prescription drug costs affordable for their employees are speaking out about the importance of PBM services:
“PBMs are crucial in helping employers like me negotiate with drug manufacturers, secure rebates, and pass down savings to keep costs manageable for businesses and employees alike…Rebates from PBMs leverage the scale and bargaining power that smaller businesses could never access alone. This helps us keep costs manageable and benefits competitive. Here in Minnesota, where small businesses are the backbone of the economy, this kind of flexibility is essential for growth and our competitive edge.”
-Marcy Kisby Baumann, small business owner in Eagan, Minnesota, Duluth News Tribune, 12/9/24
“PBMs are vital for driving health care costs down and helping employers offer affordable benefits to their employees. This is especially true for small businesses like mine…
PBMs help keep drug prices in check by negotiating with pharmaceutical companies, ensuring fair costs and protecting businesses from being squeezed by rising health care costs. Without them, many employers would be forced to scale back benefits or face skyrocketing costs, which would threaten jobs and reduce competitiveness.”
-Steve Sydow, small business owner in Ironton, Ohio, 11/12/24
Government mandates don’t help small employers, choices and flexibility do. Not only do employers make their own choices, survey research shows that they are satisfied with their PBM and the services they receive, and feel confident they are making the right decisions.
96%
of employers feel confident in their organization’s ability to make decisions regarding prescription drug benefits correctly
90%
of employers expressed satisfaction with their PBMs’ clarity and transparency of contract terms
88%
of employers express satisfaction with their PBMs’ ability to provide the lowest costs for employees at the pharmacy counter
90%
of employers that received rebates in the last 12 months applied them towards at least one activity to offset the cost of their prescription drug benefits
View the NORC Survey HERE.
Learn more about why employers value PBMs HERE.
