How does a pharmacy benefit manager (PBM) affect prescription drug prices?

A pharmacy benefit manager (PBM) plays a vital role in influencing prescription drug prices primarily through negotiating prices and reimbursement rates. PBMs act as intermediaries between insurers, pharmacies, and pharmaceutical companies, leveraging their volume of prescriptions to negotiate lower prices for medications. This negotiation process often results in discounted rates for drugs, which can lead to lower costs for both insurers and consumers.

PBMs also establish formularies, which are lists of covered medications for insurance plans. This process includes determining which drugs will be included in the insurance plans and at what negotiated price, thereby directly impacting the overall pricing structure of prescription drugs.

While other functions of a PBM may involve aspects of drug pricing, such as determining copayment amounts or influencing availability through formulary decisions, the core function that directly and significantly affects drug prices is the negotiation aspect. This capability allows PBMs to mitigate costs for consumers and insurers, making this the most accurate choice regarding their overall influence on prescription drug prices.