The Role of Pharmacy Benefit Managers in Driving Pharmaceutical Prices and Utilization

Abby Alpert, Health Care Management, The Wharton School

Abstract: The business model of Pharmacy Benefit Managers (PBMs) has evolved dramatically over the last few decades from basic insurance claims processors to becoming one of the key drivers of pharmaceutical pricing and utilization in the U.S. PBMs are the “middlemen” between insurers and drug manufacturers. They contract with insurers to negotiate prices with drug manufacturers on their behalf. By pooling lives across many insurers, PBMs can obtain deep discounts and rebates on pharmaceuticals. However, due to the high level of concentration in the PBM market, these savings may not be fully passed on to insurers and consumers. Moreover, since PBMs share in the rebates (which are proportional to price), manufacturers may have a perverse incentive to raise prices rather than lower them in the presence of PBMs. In this project, I will examine the role of PBMs in influencing pharmaceutical prices and utilization.

Michelle Eckert is Marketing and Communications Coordinator for the Mack Institute, where she works to engage students, researchers, and corporate partners in opportunities for collaboration. Michelle received her B.A. in Art from Valparaiso University in 2007. Her background includes two AmeriCorps terms of service working to teach mathematics, computer literacy, and job readiness skills to out-of-school youth in Philadelphia, focusing particularly on promoting access to post-secondary education.