One of the most powerful yet least understood players is the Pharmacy Benefit Manager (PBM). These organizations operate behind the scenes, yet they have a major impact on how much you pay for prescription drugs, which medications are covered by your insurance, and which pharmacies you can use.
VELLIS NEWS
23 Jun 2025
By forga_team
Related Articles
Vellis News
25 March 2025
SEPA payments represent the cosmopolitan and revolutionary payment method conducted mainly in the EU and certain non-EU countries. Its pivotal role in simplifying euro-denominated transactions has become a game changer for numerous industries. SEPA payments represent a fantastic initiative by the European Union to streamline standardized payments across Europe and make them faster and more secure.
Vellis News
10 June 2025
Mobile gaming means playing video games on phones, tablets, or handheld devices. These games range from simple puzzles to massive multiplayer experiences, playable anytime and anywhere.
Vellis News
23 June 2025
In today’s digital healthcare landscape, protecting patient information is the law. Whether you’re a local pharmacy, a hospital-based dispensary, or an online provider, HIPAA compliance for pharmacy operations is essential.
But what exactly is a PBM? This guide breaks down everything you need to know – from their role in the drug supply chain to how they affect patients, insurers, and the broader healthcare market.
A Pharmacy Benefit Manager (PBM) is a third-party administrator that manages prescription drug benefits on behalf of health insurers, Medicare drug plans, large employers, and other payers. PBMs play a crucial role in the U.S. healthcare system by acting as intermediaries between insurers, pharmacies, and drug manufacturers.
They are responsible for negotiating drug prices, managing formularies, processing pharmacy claims, and implementing cost-containment strategies. While PBMs aim to reduce costs and improve access to medications, their role has become controversial due to concerns about transparency and their impact on drug pricing.
PBMs sit at the center of the pharmaceutical supply chain and coordinate several moving parts:
While they do all these, they generate income through a combination of the following mechanisms:
This opaque business model has raised concerns about misaligned incentives and hidden profits.
Many organizations rely on Pharmacy Benefit Managers (PBMs) to manage prescription drug benefits efficiently and control costs while ensuring patients receive the right medications.
Both public and private insurance companies partner with PBMs to administer drug benefits for their members. PBMs help reduce prescription drug costs by negotiating lower prices with pharmaceutical manufacturers and leveraging their purchasing power.
These managers often implement formulary controls, which determine which medications are covered and how much members pay at the pharmacy. This ability to shape access and pricing is a key reason insurers depend on PBMs.
Large employers contract with PBMs to keep prescription drug spending under control. PBMs help design formularies, secure volume-based discounts from drug manufacturers, and manage claims, ultimately lowering costs and avoiding pharmacy billing issues for both employers and employees.
According to industry surveys, approximately 90% of large employers report satisfaction with PBM services, particularly in terms of cost savings and access to essential medications.
Federal and state programs like Medicaid and Medicare Advantage also work with PBMs to manage drug benefits. PBMs support these agencies by negotiating prices and rebates, developing covered drug lists, and overseeing claims processing.
For example, PBMs secure more favorable pricing for medications used in Medicaid by negotiating directly with drug manufacturers. They also ensure that pharmacies comply with coverage rules and billing guidelines, helping government programs offer broad access to medicines while keeping expenditures in check.
PBMs offer several advantages to healthcare stakeholders.
By leveraging their scale, PBMs negotiate lower drug prices and manufacturer rebates, which can reduce insurance premiums and out-of-pocket costs.
Helps ensure that patients receive clinically appropriate and cost-effective medications.
Encourages use of in-network or mail-order pharmacies to reduce dispensing costs.
PBMs handle the complexities of drug claims and online pharmacy payment processing, freeing up resources for payers and providers.
Despite the mentioned benefits above, PBMs have faced mounting criticism for several reasons.
PBMs play a major role in determining the final price patients pay for medications.
Bulk negotiation and tiered formularies can drive prices down.
When rebates aren’t passed on to consumers or when PBMs favor expensive drugs due to higher rebates, patients may face inflated costs.
Patients often struggle to understand why one drug is covered over another or why some pharmacies cost more, creating frustration and confusion.
PBMs play a central role in how drugs are priced and which medications are accessible to patients. By negotiating with drug manufacturers, PBMs secure rebates and discounts in exchange for favorable placement on formularies.
These rebate arrangements often come in two forms: pass-through models, where savings are shared with the plan sponsor, and at-risk models, which are tied to drug performance or usage. While these strategies can reduce payer costs, the benefits are not always passed on to the patient.
Although rebates can reduce the net cost for insurers or employers, PBMs may retain a portion rather than passing all savings to the consumer. Because patients often pay based on the drug’s list price, not the discounted price after rebates, they may see little financial relief at the pharmacy counter.
As of 2025, the PBM market is dominated by a few large players:
Together, these three PBMs control over 75% of the U.S. prescription drug market, giving them considerable negotiating power with both drug manufacturers and pharmacies.
Other notable PBMs include Prime Therapeutics, MedImpact, and Navitus Health Solutions, though they serve smaller market segments.
PBMs are most prominent in the U.S., where they manage drug benefits for millions of patients. Companies like CVS Caremark, Express Scripts, and OptumRx process the majority of pharmacy claims in the country, helping insurers and employers manage costs.
Internationally, PBM-style models are gaining traction in both public and private health systems. European countries have begun experimenting with PBM-like services to manage national formularies and reduce pharmaceutical spending. In countries like Canada and Australia, private insurers use similar systems to negotiate pricing and manage coverage.
Globally, the goal is the same: make medications more affordable and accessible while maintaining safety and quality standards.
PBMs also build broad pharmacy networks, giving patients the choice to pick up prescriptions at a local pharmacy or opt for home delivery. These services improve convenience and help reduce costs for employers and individuals alike.
If you’re wondering how do i know if an online pharmacy is legitimate, here are key considerations:
Ultimately, the right PBM will offer a balance of affordability, transparency, network access, and customer support to deliver effective pharmacy benefits while managing costs.
Regulatory scrutiny of PBMs has intensified in recent years.
As policymakers and healthcare stakeholders push for more transparency and accountability, PBMs will likely face significant changes in how they operate. Some reforms may benefit patients directly by reducing costs or improving access to medications.
A PBM is a company that helps manage prescription drug plans for insurers, employers, and governments by negotiating prices and handling logistics.
PBMs play a major role in drug pricing, availability, and plan design, which affects both cost and access for patients.
PBMs earn revenue through rebates from drug manufacturers, administrative fees, and sometimes by charging more to insurers than they reimburse pharmacies.
Yes, while PBMs are most prominent in the U.S., similar models are emerging in global and online healthcare systems.
Yes, businesses and insurers can select PBMs based on price transparency, services offered, and network agreements.
Center for American Progress. (2024, March 13). 5 things to know about pharmacy benefit managers. https://www.americanprogress.org/article/5-things-to-know-about-pharmacy-benefit-managers/
Good Day Pharmacy. (n.d.). Understanding pharmacy benefit managers (PBMs) and their impact on independent pharmacies. https://www.gooddaypharmacy.com/post/understanding-pharmacy-benefit-managers-pbms-and-their-impact-on-independent-pharmacies
Socal, M. P., Bai, G., & Anderson, G. F. (2023). The pharmacy benefit manager market concentration and its potential impact on drug prices. JAMA Health Forum, 4(11), e233995. https://jamanetwork.com/journals/jama-health-forum/fullarticle/2811344
Ready to transform your financial management?
Sign up with Vellis today and unlock the full potential of your finances.
Related Articles
Vellis News
11 April 2025
International Financial Reporting Standards (IFRS) are globally recognized accounting rules designed to make financial statements consistent, comparable, and transparent across borders.
Vellis News
31 March 2025
High-risk businesses often expand globally and transact with customers from all over the world. Because of this, they need the assistance of high risk payment processors that can handle currency conversion alongside big transaction volumes, chargebacks, and other concerns for high-risk sectors.
Vellis News
25 March 2025
In this thriving tech frenzy world, where digital transformations are shaping the world of finance, it has become utterly challenging to keep track of numerous payment alterations. Real time payments or RTPs focus on enabling easier, faster, and more productive payment methods that enable immediate transfer of funds 24/7.
We use cookies to improve your experience and ensure our website functions properly. You can manage your preferences below. For more information, please refer to our Privacy Policy.
PCI DSS-certified and listed on Visa’s Global Registry – verified security you can trust.
© 2025 Vellis Inc.
Vellis Inc. is authorized as a Money Services Business by FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) number M24204235. Vellis Inc. is a company registered in Canada, number 1000610768, headquartered at 30 Eglinton Avenue West, Mississauga, Ontario L5R3E7, Canada.