All About PBMs


Pharmacy benefit managers serve as a middleman between payers and pharmacies.

A Pharmacy Benefit Manager (PBM) is a third party administrator contracted by health plans, employers, unions and government entities to manage prescription drug programs. A PBM acts as a fiscal intermediary between insurers/payers and pharmacies.

There is an old saying, 'Possession is 9/10ths of the law,' and that applies to PBMs. At the end of the day, the PBM 'possesses the pharmacy’s money.' Most, if not all, PBM contracts give the PBM the right to terminate its contract with the pharmacy with, or without, cause.

'With cause' can include misrepresentations by the pharmacy to the PBM, such as answers in a recredentialing questionnaire; failure by the pharmacy to adhere to the requirements imposed by the PBM on its member pharmacies, and a breach by the pharmacy of terms of the PBM contract. 'Without cause' means exactly what it says. If the PBM simply 'does not like what the pharmacy is doing,' then the PBM can terminate the contract.

PBM Recredentialing

PBMs validate the credentials of pharmacies to ensure they are in good standing with state and federal laws and meet quality performance standards. They will recredential pharmacies every year or couple of years to ensure they meet the PBMs’ participation requirements.

Recredentialing questionnaires inquire about a number of issues, including whether the pharmacy is engaged in mail order or compounding; whether the pharmacy’s marketing reps are W2 employees or 1099 independent contractors; and the collection of copayments.

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