August 18, 2017
2 min read

Pharmacy Benefit Managers: Drug Industry’s Hidden Middlemen

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Editor’s Note

In this issue, we are fortunate to bring readers a Guest Editorial from Michael C. Schweitz, MD, a member of the board of directors for the Coalition for State Rheumatology Organizations and a member of the Healio Rheumatology Peer Perspective Board, and Ally Lopshire, JD, a government affairs specialist at WJ Weiser & Associates. They share their opinions on the role of pharmacy benefit managers acting as the intermediaries between insurers, manufacturers and pharmacies. This is an important and timely topic, and I encourage readers to get involved in the mission of the Alliance for Transparent and Affordable Prescriptions.

Leonard H. Calabrese, DO
Chief Medical Editor, Healio Rheumatology

Michael C. Schweitz
Michael C. Schweitz

Among one of the most pressing issues in American politics is prescription drug costs, and for good reason. Even patients with insurance are being forced to pay more out of pocket for their prescriptions. As the American health care system gets more complex and convoluted, solving this problem is becoming more difficult. One reason for this is the drug industry’s hidden middlemen — pharmacy benefit managers.

Role of the Rebate System

Acting as intermediaries between insurers, manufacturers and pharmacies, pharmacy benefit managers (PBMs) play a uniquely central role in the prescription drug market, handling everything from negotiating prices and discounts with drug manufacturers and setting patient copayment amounts to determining which drugs are covered by which health plans. Yet, despite their undeniable significance, PBMs and their effect on prescription drug costs have managed to go largely unnoticed by most Americans, including physicians, patients and policymakers. This allows PBMs to quietly influence not only prices, but also the amount patients actually pay for their prescriptions and which drugs are available and accessible.

An important aspect of the drug market is the rebate system, whereby PBMs negotiate and receive retroactive payments from drug manufacturers in exchange for preferred placement on the PBM’s tiered formulary. This placement position determines the level of coverage for a drug and therefore whether it is easily accessible to patients. PBMs purport to pass back a portion of these rebates to the insurers, but due to the opaque nature of their contracts, most of the funds appear to go to their bottom line.

Access to Affordable Treatment

In theory, the PBM system is supposed to lower drug costs, but this is far from reality. Instead, it creates reverse financial incentives for PBMs to develop their formularies based on rebates and to negotiate higher prices. The higher list prices and resulting formulary positions have real consequences for patients. Patient cost-sharing is based off the list price and not the rebated price, therefore, patients with high deductible plans or coinsurance are unfairly forced to pay a significantly larger out-of-pocket amounts for their prescriptions. The position of the drug on the formulary based on the contractual rebate negotiations creates obstacles for patient access to proper medication or forces patients to switch from effective medications altogether.


To address PBMs and their impact on prescription drug costs and patient access to affordable treatment, numerous patient and provider groups, including the Coalition for State Rheumatology Organizations, the American College of Rheumatology and the Global Healthy Living Foundation, have joined to form the Alliance for Transparent and Affordable Prescriptions (ATAP). This group’s mission is to shine a light on this opaque system and educate physicians, patients and policymakers about the role of PBMs in the current landscape of accelerating drug costs.

Visit the ATAP website at to learn more.

Disclosures: Lopshire and Schweitz report no relevant financial disclosures.