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Quality healthcare is essential to living well. Doctors, dentists, and specialists are there to help people by monitoring their health with regular checkups as well as diagnosing and treating any problems that occur. Healthcare tends to be expensive and insurance is vital to being able to afford it. There are regular visits, tests, and procedures and you also need surgery or another extended treatment.
One of the more common and expensive forms of treatment is medication. Drugs are frequently prescribed by medical professionals for the treatment of many kinds of health issues. This is a part of healthcare people need insurance or other help in paying for. Pharmacy Benefit Management was created to provide that health.
Pharmacy Benefit Management
A pharmacy benefit management company acts as a third party in negotiating drug prices between manufacturers of medication, pharmacies, and providers of healthcare insurance. This helps to allow the public access to medications, keep the costs of drugs reasonable, and control how much money pharmacies receive. PBMs create lists of prescription drugs which are called formularies.
What PBMs Do
A PBM does not directly get involved in the distribution of prescription drugs. Rather they conduct negotiations throughout the supply chain from manufacturers to health insurance companies. This includes wholesalers and pharmacies.
When a new drug comes on the market, wholesalers negotiate with the manufacturer. The wholesalers then buy the medication and sell it to pharmacies. A PBM will negotiate on behalf of the pharmacies with the manufacturers. PBMs receive rebates from drug companies and make payments to pharmacies on behalf of insurance providers for the drugs they cover. This allows for discounts and rebates that make medication affordable for insurance companies, thus keeping their premiums down.
PBMs are also responsible for creating and maintaining formularies. These are lists of prescription medications that are covered by health insurance providers. The lists are continually updated and carry the drugs that healthcare professionals are currently using to treat various health issues. A formulary helps to ensure that the drugs on it are safe, effective, and affordable.
Patients are able to access their healthcare provider’s formulary online to see if it includes the drugs their doctors are prescribing. It is also possible for the patient to contact their health insurance company to check if a drug is in the formulary. In the event that it isn’t, a similar medication can be recommended.
Tiers of Prescription Drugs
Prescription drugs fall into four tiers. Healthcare plans place them into these tiers based on availability, out-of-pocket costs, and the clinical effectiveness of the drug.
- Tier 1 – These are the drugs that have the lowest co-payment and are usually generic versions of name brands.
- Tier 2 – The second-tier drugs are generally lower-price brand-name medications with moderate co-pays.
- Tier 3 – The drugs in tier three are brand-name medications that have generic versions and the highest co-pays.
- Tier 4 – The final tier is for specialty medications that are used in the treatment of severe health problems.
The drugs of Tiers 1 and 2 are the preferred medications on the formularies because of the fact that they have the lowest co-pays and thus are the most affordable. Tier 3 and 4 drugs are the less preferred medications because of their significantly higher co-payments.
Health insurance providers issue ID cards to their customers. These cards contain information such as the patient’s name, ID number, and what plan they are on. The cards are presented on visits to healthcare professionals for billing purposes. They are also presented to pharmacists when picking up medication. Some pharmacies will also require an ID card from the PBM to be presented.
Prescription drugs are often essential in treating medical conditions. They can be expensive. PBMs, help healthcare providers to keep their co-payments reasonable, thus allowing their customers to have access to the medications they need. PBMs are a vital part of the healthcare and health insurance system.