What is a Pharmacy Benefit Manager?


Pharmacy Benefit Managers, or PBMs, have gotten a lot of attention over the last few years.  The terms get thrown around whenever insurance is brought up, whether it be health insurance or workers’ comp insurance.  If you haven’t heard the term PBM, chances are you have heard of specific PBMs - like Express Scripts or CVS Caremark. And odds are you probably have a prescription card in your wallet with one of those names on it.

So, what is a Pharmacy Benefit Manager? A lot of it is right there in the name - a PBM manages pharmacy benefits under an insurance plan. An insurer, or a self-insured company, or even the federal government, hire PBMs to handle the pharmacy aspects of their insurance plan - from contracting with pharmacies, to negotiating discounts and rebates with manufacturers, to processing payments for prescriptions.  PBMs take on the role of administering all aspects of a benefit (prescriptions) on behalf of the insurer, and more notably, they help control and reduce costs for insurers.

How exactly do they control costs?  Those contracts and negotiated rates mentioned above, they all translate into lower costs for the insurer when it comes to prescriptions for their insured.  PBMs negotiate rebates and deals with drug manufacturers and these negotiations are what determine if a certain drug is covered by your prescription plan or excluded.  These rebates and deals mean an insurer is paying less for a prescription drug than they would without the PBM. 

Additionally, PBMs often operate pharmacy networks, in which they have a series of pharmacies they contract with to not only offer a patient access to their medications, but at a discounted cost to the insurer.  They contract with those network pharmacies to cover prescriptions at a reduced rate, and in return, the PBM instructs their patients to utilize those pharmacies.  So the pharmacy accepts a lower rate for a prescription than they would for someone not covered by that PBM but in return they are provided a stream of patients.

While PBMs, rebates and discounts can be confusing, the true role of a PBM is to contain medication costs on a claim. At IWP, we believe faster healing means lower overall costs. We work in conjunction with physicians, attorneys and payers to deliver the highest patient care as a contracted provider in the industry’s leading PBM networks. For a complete listing of all in-network PBMs, click here.

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