drugs healthcare

Drug Prices: Blame the PBM

Some critics of industry prices think the high prices are due to pharmacy benefit managers (PBMs). PBMs are essentially the middleman between the pharmacy and the drug manufacturer. However, as Tim Wentworth, a CEO from Express Scripts states, “Drug makers set prices, and we [the PBM] exist to bring them down” (Weinberg & Langreth, 2017). About 60 years ago, PBMs started as just payment processers. Now PBMs create formularies and negotiate prices with pharmacies, insurance companies, and manufacturers. Even though in some instances PBMs pocket manufacturer rebates, charge insurance companies more for generics, and funnel patients to their own specialty and mail-order pharmacies, PBMs have successfully decreased medication costs in some of the most costly areas such as Hepatitis C. PBMs sit opportunistically between drug manufactures and insurance plans which allows them to increase competition between equivalent drugs and drive prices down.

PBMs generate savings for insurance companies by negotiating rebates from drug manufacturers, negotiating discounts from drugstores, encouraging use of generic drugs, and reducing waste while improving adherence (Generating Savings for Plan Sponsors and Consumers, 2016). The main function of a Pharmacy Benefit Manager (PBM) is to render rebates from drug manufactures on behalf of health plans. The benefit is that if drug companies fail to pay rebates, they might not win a spot on the health plan’s formulary. This cuts into manufacturer’s sales (Barrett & Langreth, 2017). When prescription insurance plans are managed at the state level, it results in political bureaucrats determining the medications that a physician can prescribe (Herrick, 2011).

Lately manufacture drug coupons have been relevant in the news to inform consumers that there are alternative methods of funding necessary prescription drugs. Often at the pharmacy counter, if one is trying to fill a brand medication, the pharmacy staff will recommend searching for manufacture coupons online. This is a great benefit for the consumer; however, this allows drug manufactures to inflate costs, insurers raise payouts, all while the consumer pays a flat amount (Frankt, 2017).


Barrett, P., & Langreth, R. (2017). The Crazy Math Behind Drug Prices. Bloomberg Businessweek. Retrieved from

Frakt, A. (2017). When a Drug Coupon Helps You but Hurts Fellow Citizens. The New York Times. Retrieved from

Generating Savings for Plan Sponsors and Consumers. (2016). Retrieved from

Herrick, D. (2011). Increasing the Cost-Effectiveness of Medicaid Drug Programs. National Center for Policy Analysis. Retrieved from

Weinberg, N. & Langreth, R. (2017). Drug Costs Too High? Fire the Middleman. Bloomberg. Retrieved from