NCPA - National Center for Policy Analysis

The "Troubles" with Pharmacy Benefit Managers

March 21, 2017

Senior Fellow Thomas Hemphill writes in Regulation Magazine:

Whenever U.S. policymakers and business executives discuss health care, the issue of ever increasing costs quickly arises. And for good reason. According to a recent analysis by the Kaiser Family Foundation,
U.S. per capita expenditures on health care are expected to increase from $9,695 in 2014 to
$15,618 in 2024, an average annual growth rate of 5%.

Drug therapy, compared to hospital treatment and surgical procedures, is often the most efficient form of medical treatment.  But it is costly nonetheless. For 2014, prescription drug costs made up 9.8% of total annual health care expenditures, with total retail prescription drug spending accounting for $297.7 billion.
That is a 12.2% increase over 2013.

To hold drug costs down, many private employers, insurers, and even states and the federal government use pharmacy benefit managers (PBMs). PBMs are third-party administrators of prescription drug programs. Some 266 million Americans -- approximately 82% of the total U.S. population -- are covered by these programs as part of their commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefit Program, state government employee plans, and Managed Medicaid plans.

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