PBMs such as Medco, Caremark, and Express Scripts manage pharmacy benefits on behalf of employers and health plans. They establish formularies of preferred drugs, negotiate rebates and discounts with pharmaceutical manufacturers and pharmacy networks, provide mail order services, and handle administrative details. However, it’s not clear that they lower costs for their customers, and the rebate agreements they have with manufacturers are not typically disclosed. (Matthew Holt at The Health Care Blog has written extensively on this topic.) Customer satisfaction is sometimes lacking.
Independence Health, a small health plan in New York State that dropped its PBM eight years ago, is launching what it calls a “transparent” PBM business model, in which it will pass along all of the discounts and rebates it receives and charge a straight fee-for-service to its customers. It seems unlikely that this move alone will shake up the PBM business, but it will be fun to see if there is an appetite for the new offering.March 31, 2005