Insurers – including state employee programs – contract with PBMs to provide a number of services. One job of the PBMs is to negotiate prices with manufacturers, in theory to get the lowest prices for insurers, and therefore, for you. PBMs have a lot of leverage over manufacturers, which puts them in a great position to negotiate.
Where does that leverage come from?
PBMs are the ones making the decisions about what drugs are covered by your plan, not the insurance companies. Manufacturers offer rebates on these prescriptions that should be going to the patients and lowering their costs at the counter, but PBMs act as the gatekeepers of those rebates and funnel the money back to themselves so it never reaches the intended recipients, the patients.
How is that possible?
PBMs are not required to disclose any rebates that they negotiate, therefore two things happen. Because more expensive drugs mean bigger rebates, PBMs are incentivized to favor drugs that cost more, keep drug prices high, or even pressure manufacturers to inflate prices. All to ensure that the most money keeps flowing back into their pockets and not the hands of pharmacies or patients