Pharmacy Benefit Manager (PBM) | Practical Law

Pharmacy Benefit Manager (PBM) | Practical Law

Pharmacy Benefit Manager (PBM)

Pharmacy Benefit Manager (PBM)

Practical Law Glossary Item w-020-4152 (Approx. 3 pages)

Glossary

Pharmacy Benefit Manager (PBM)

An entity in the health care industry that:
PBMs may provide services that include claims administration, managing data and formularies, mail-order drug sales, determining benefit levels, and making disbursements. PBMs may also create networks of pharmacies that fill prescriptions for health plan participants. The PBM reimburses pharmacies in its network for certain dispensed prescriptions at rates set by the PBM's "maximum allowable cost" list. In addition, PBMs may negotiate discounts from drug manufacturers and provide drug substitution programs.
In recent years, PBMs have been the subject of litigation regarding issues such as whether:
  • State statutes intended to regulate PBM conduct are ERISA-preempted.
  • PBMs are fiduciaries for ERISA purposes.
In December 2020, federal spending legislation—the Consolidated Appropriations Act, 2021 (CAA-21)—added new reporting requirements for health plans regarding pharmacy benefits and drug costs (for example, premium reductions associated with drug manufacturer rebates) (Pub. L. No. 116-260, Div. BB, Title II, § 204 (2020)). The CAA-21 rules should bring about greater transparency regarding PBM-related earnings related to health plan prescription drugs.
PBMs also may face additional regulation from the individual states, regarding their ability to dispense prescriptions for medical abortions, in light of the Supreme Court's June 2022 ruling overturning the right to abortion under the federal Constitution (Dobbs v. Jackson Women's Health Org., 142 S. Ct. 2228 (2022)). For more information, see:
For more information on PBM issues generally, see: