Pharmacy benefit management

In the United States, a pharmacy benefit manager (PBM) is a third-party administrator of prescription drug programs for commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Program, and state government employee plans. PBMs operate inside of integrated healthcare systems (e.g., Kaiser Permanente or Veterans Health Administration), as part of retail pharmacies (e.g., CVS Pharmacy), and as part of insurance companies (e.g., UnitedHealth Group).

The role of pharmacy benefit managers includes managing formularies, maintaining a pharmacy network, setting up rebate payments to pharmacies, processing prescription drug claims, providing mail order services, and managing drug utilization. PBMs act as the middlemen between pharmacies, drug manufacturers, wholesalers, and health insurance plan companies.

As of 2023, PBMs managed pharmacy benefits for 275 million Americans and the three largest PBMs in the US, CVS Caremark, Cigna Express Scripts, and UnitedHealth Group's Optum Rx, make up about 80% of the market covering about 270 million people with a market of almost $600 billion in 2024.

This consolidation and concentration has led to lawsuits and bipartisan criticism for unfair business practices. In 2024, The New York Times, Federal Trade Commission, and many states' attorneys general accused pharmacy benefit managers of unfairly raising prices of drugs.

Additionally, several states have created regulations and policies concerning PBM business practices.

Business model

In the United States, health insurance providers often hire an outside company to handle price negotiations, insurance claims, and distribution of prescription drugs. Providers that use such pharmacy benefit managers include commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Program, and state government employee plans.