Office of Program Policy Analysis and Government Accountability
Office of Program Policy Analysis and Government Accountability

Legislature Could Consider Options to Address Pharmacy Benefit Manager Business Practices

Report 07-08, February 2007




Report Summary

  • Pharmacy benefit managers (PBMs) provide their services to health care sponsors as a way to manage prescription drug benefits and costs. While they emerged in the mid-1980s as entities that processed prescription drug claims, they have expanded to provide a wide range of services, typically including developing and managing drug formularies and pharmacy networks and providing drugs through mail-order and specialty pharmacies. Because PBMs act as intermediaries between health plan sponsors and drug manufacturers and pharmacies, they are sometimes referred to as middlemen in the drug industry.
  • In recent years, federal and state litigation as well as various stakeholders in the prescription drug industry have alleged that PBMs sometimes engage in unfair business practices. This perception results from the lack of transparency in PBM costs and profits, which occurs because PBMs consider their contract negotiations with drug manufacturers and pharmacies confidential and proprietary. As of December 2006, three states and the District of Columbia have passed legislation that addresses transparency, and another 28 states have considered such measures. In addition, two states have passed legislation to regulate PBMs. Health plan sponsors and PBMs have also responded to these concerns by taking steps to increase transparency. The Legislature could give market forces an opportunity to increase transparency or could consider legislation to regulate PBMs.


Related Reports
  1. Inflated Pricing and Confidential Information Prevent Medicaid from Ensuring Lowest Prescription Drug Prices
    Report 06-07 January 2006
Copies of this report in print or alternate accessible format may be obtained by email OPPAGA@oppaga.fl.gov, telephone (850) 488-0021, or mail 111 W. Madison St., Room 312 Tallahassee, FL 32399-1475.
Copies of this report in print or alternate accessible format may be obtained by email OPPAGA@oppaga.fl.gov, telephone (850) 488-0021, or mail 111 W. Madison St., Room 312 Tallahassee, FL 32399-1475.
social services, health, medicaid, Pharmacy benefit managers, transparency, prescription drugs claims processing, pharmacy, pharmacist, health plan sponsors, prescription drug benefits, pharmaceutical, drugs, drug pricing, pharmacy reimbursement, medicaid drug rebates, average wholesale price, average manufacturer price, wholesale acquisition cost, medicaid state rebates, medicaid drug purchasing pool, generic drugs, brand name