By Ardyth J. Eisenberg

When costs go up-up-up, fast-fast-fast, you look for ways to fix the cause. Gas prices have shown us this. Prescription drug prices are doing this, too. People and programs that pay for prescriptions are scrambling to contain prescription costs. This article looks at the size of the problem, what payers are doing in response, and how this affects patients.1

The size of the problem
Half of all Americans say they take at least one prescription drug a day. One in five Americans takes four or more prescription drugs daily. (Full disclosure: I’m in the four-a-day category, although I think of myself as healthy.)

Prescription drugs cost almost $300 billion a year, or 15 percent, of US health care costs.2 For private insurance companies, prescription drugs make up almost half their claims costs.3 Already in this century, spending on prescription drugs has gone up faster than spending on hospital or physician services.4 Several studies predict drug costs will increase six to nine percent in 2010 alone.5

What’s being done about it
Who’s minding the drug store? The short answer is, Pharmacy Benefit Managers or Prescription Benefit Managers (PBMs). A PBM is a service hired by employers or health care payers to help save on prescription costs. Most PBM services operate under the supervision of pharmacists and physicians. One PBM estimates that keeping a closer eye on the drug store can save $42 billion a year, or about 14% of our annual drug costs.

Three-fourths of people who have insurance benefits for drugs have a PBM, whether they know it or not. Medicaid is required by law to use PBMs. Medicare Part D prescription plans may also use them. How the PBM does its job can have a direct effect on your medical care, just when you need it most. Here’s how PBMs work, with some pros and cons drawn from my personal experience.

You ask your drugstore to fill a new or an existing prescription. Your drugstore contacts your insurance company or the PBM for payment approval. The PBM steps in at this point to see whether it can save money on the prescription. Some insurance companies have their own PBM department. Others use independent PBMs services. PBMs ask these basic questions:

Is the drug appropriate for your condition? The PBM might screen for drug allergies that you have, point out dangerous interactions with other drugs you take or identify a similar, but less expensive drug than the doctor prescribed.6

The PBM may also see if the drug you want is on your insurance company’s formulary. A formulary is a list of drugs that your insurer, HMO or government program will pay for. (The PBM probably helped make the formulary list for your program, too.) If your drug isn’t on the formulary, it won’t be covered.7

The PBM usually looks to see if the drug you need is available in generic form, rather than brand name, which often costs less.8 The PBM may also suggest that you start with a generic or less expensive drug and switch to a brand name drug only if the first drug doesn’t work for you (called a “step program”).9

Finally, PBMs may use their purchasing power to negotiate discounts with drug makers, and pass some of that savings on to your health plan.

How this works, in general
The good news is, it helps to have a knowledgeable resource that can help watch for drug allergies, drug interactions and ways to save you money. You may not remember to remind a doctor of an allergy, or you may forget to tell one doctor about a drug that another doctor has prescribed. This part of minding the drug store is a valuable patient safety effort.

Here is where things can get sticky, from your standpoint: If the PBM finds a way to save on your drug cost, it notifies the drug store or your physician and asks that the prescription be changed to meet its guidelines.

The drug you need is a form of medical treatment, just like visiting a doctor or hospital. The PBM’s recommendation can delay your medical treatment while it waits to discuss its request with your pharmacy and/or your physician. Sometimes the PBM may simply tell the pharmacy it won’t pay for the prescription, leaving the pharmacist to negotiate with your doctor and notify you. Either way, your doctor may not take kindly to having his or her decision second-guessed by strangers.10 And, either way, you’re in limbo, waiting for medical care your doctor recommended, while the conversation goes on with the PBM. The worst part of this process is that you are forced to wait for medical care that you need at the worst possible time – when you need the care.

How this works, in particular
From my own experience, how PBMs operate is, “not very well.” PBMs are relatively new to the insurance and medical plan scene, and I don’t believe they’ve worked out their procedures carefully yet. As a result, patient care can be interrupted. Here are some real-world experiences.

A woman who has serious arthritis takes medication once a month for the disease. Her insurance company’s case management department coordinates the care for her. Despite that, her insurance company’s PBM department stopped approving payment for the drug. She had to go without treatment while she tried to get the two departments to agree to resume payment.

An employer began using a new insurance company that had a PBM unit. The PBM denied a prescription drug that one member had taken for years, which the previous insurance company had always paid for. The PBM refused to pay, saying an over-the-counter medication should work as well. The member ran out of the prescription while she tried to show that the over-the-counter medication had long ago stopped working for her.

A PBM recommended “step therapy” for a woman who had taken the same antidepressant for several years. It denied payment for the antidepressant, without consulting her previous claims to see that other antidepressants had been tried, but did not work for her symptoms. She began experiencing withdrawal from the antidepressant before the PBM finally approved payment.

A PBM refused to pay for a higher dosage of a prescription drug, saying the new dosage didn’t exist, although it was listed in the PBM’s own formulary.

In all of these real-life cases, the patient, while needing medication, also had the burden of making certain that the PBM, pharmacy, insurance company and doctor talked to each other, and talked promptly. Here are some steps to take to ease the challenge.

What to do
1. Know what you’re taking. Always keep a list of all the prescriptions and over-the-counter drugs you take. AARP offers a personal medication record for this. It’s available on AARP’s website at http://www.aarp.org/health/conditions/articles/my_personal_medication_record.html.

2. Do you have a PBM?

  • Find out from your employer or insurance company or government program if you have a PBM.
  • Ask the PBM’s name, what it does to review your prescriptions, and how to contact it.
  • Ask how you will be notified if the PBM wants to change one of your prescriptions and how long it will take after you file the prescription.
  • Ask how to appeal the PBM’s decision and how long the appeal should take.
  • Find out if the PBM is accredited by the Utilization Review Accreditation Committee (URAC). URAC is a private, nonprofit group that sets standards for how health insurers and review groups review your medical care. You can complain to URAC if you think an accredited PBM is not meeting its standards. For more information, go to http://webapps.urac.org/complaint/.

3. Do you have a formulary?

  • If your insurer or PBM has a formulary, check to see if the prescriptions you take are on the formulary. If they are, they should be paid.
  • If your medication isn’t on the formulary, ask your employer, your health plan and the PBM if it can be added.
  • If your medication can’t be added, find out what similar drugs are on the formulary.
  • Ask your physician if the PBM’s formulary drugs are acceptable substitutes for the drugs he or she recommended.

4. Will a generic drug work as well?

  • When you get a new prescription, ask your doctor if a generic version of the drug is acceptable.
  • Check the prescription itself to see if the doctor approved use of a generic.
  • If the doctor requires a name-brand medication and doesn’t want you to take a generic, point this out to your pharmacist.
  • If you take a generic drug but it doesn’t work as expected, tell your doctor, your pharmacist and the PBM. Ask to try the brand-name version or another drug that your doctor approves. This gives important feedback to the PBM and sets the stage for appealing the PBM’s recommendation.

5. Don’t wait until the last minute to refill a prescription or turn in a new prescription. You could run out of the drug or have your symptoms get worse while you sort out the PBM’s recommendation.


  1. USA Today, Kaiser Family Foundation, Harvard School of Public Health, The Public on Prescription Drugs and Pharmaceutical Companies , March 2008, p. 5 and Chart 18.
  2. Am J Health-Syst Pharm, Vol. 66, Feb 1, 2009 , p. 237.
  3. Employee Benefit Research Institute, Fundamentals of Employee Benefit Programs , 2005, p. 32.
  4. Employee Benefit Research Institute, Fundamentals of Employee Benefit Programs , 2005, p. 25.
  5. Am J Health-Syst Pharm, Vol. 66, Feb 1, 2009 , p. 252.
  6. Employee Benefit Research Institute, Fundamentals of Employee Benefit Programs , 2005, p. 28-29.
  7. Express Scripts, Overall Trend: Getting to Zero Waste; 2009 Drug Trend Report, pp. 11-12.
  8. Express Scripts, Overall Trend: Getting to Zero Waste; 2009 Drug Trend Report, pp. 11-12.
  9. Express Scripts, Overall Trend: Getting to Zero Waste; 2009 Drug Trend Report, pp. 14.
  10. Employee Benefit Research Institute, Fundamentals of Employee Benefit Programs , 2005, p. 28-29.




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