Through our work as a pharmacy benefit manager (PBM), we play a critical role in the health care system, helping to reduce drug costs and expand coverage to affordable drugs that people need to stay healthy. Each year, PBMs deliver more than $1,000 in savings per patient and reduce costs by $10 for every $1 spent on our services.
At CVS Health®, we help lower out-of-pocket drug prices and achieve better health outcomes for customers by engaging directly with drug manufacturers to negotiate discounts, promoting patient safety and supporting the unique needs of our customers. We’ve helped lower costs for customers at the pharmacy counter for six consecutive years, and today our members see an average out-of-pocket cost (PDF) of less than $9 for a 30-day supply of medication. Last year, nearly 70% of members spent less than $100 out-of-pocket on prescriptions.
Without PBMs, small businesses would have higher drug costs
Employers, unions, public programs like Medicare and Medicaid, and other plan sponsors of all shapes and sizes hire PBMs for one reason: to offer a pharmacy benefit that balances cost, access and quality. We serve as a partner to these customers by designing and administering prescription drug coverage that works best for the organization and its employees or members.
The work we do is especially important for small businesses and startups that don’t have the scale or infrastructure to administer prescription drug coverage in the face of high and rising list prices set by drug manufacturers: Between July 2021 and July 2022, drugmakers raised prices on more than 1,200 products, with an average increase of 31.6%, with some prices increasing by more than 500%.
By leveraging the negotiating power of our more than 110 million members to negotiate discounts from drug manufacturers and connecting our members with more affordable drugs such as generics and biosimilars, we leverage our size and scale to deliver greater savings for the people we serve. In a world without PBMs, small businesses would have significantly less bargaining power, leading to higher prescription drug costs for those companies and their employees.
Healthcare that is less affordable and less safe
A world without PBMs would also mean lower quality of care, reduced access, and more risk for customers in the health care system. PBMs prevent more than an estimated 100 million medication errors per year (PDF). And PBMs are helping expand access to care by working with customers to build broad, diverse pharmacy networks and offering convenient options like home delivery and virtual care as part of comprehensive pharmacy benefits that help ensure patients can to get their medication regardless of the situation or where they live.
Greater accessibility also leads to better health outcomes: When people can afford their drugs, they are more likely to take them as prescribed, helping to prevent difficult and costly medical complications down the road. We use digital tools to help patients navigate their treatment, connect with clinical professionals and drive greater adherence.
A World Without PBMs: Unpacking the Data
We don’t have to speculate about what a world without PBMs would look like. The data speaks for itself:
- Research by University of Chicago professor Casey Mulligan, published in the National Bureau of Economic Research, found that PBMs provide almost 150 billion dollars annually in value through negotiated discounts, more cost-effective use of drugs and other cost-saving services; almost $60 billion (40%) of that value would be lost in a world without PBMs.
- The Labor Department’s Inspector General of Labor recently audited (PDF) its Workers’ Compensation Program and found that the program lacked a “pharmacy benefits manager to help contain costs” between 2015 and 2020 and could to have had more than 320 million dollars in excessive prescription drug costs during this period. Without PBMs, such lost savings could be spread across federal programs.
- In states that have enacted legislation limiting certain PBM services or tools, employers, consumers, and taxpayers may see significant increases in drug costs as a result. After West Virginia “removed” PBMs from its Medicaid program in 2017, generic drug dispensing prices fell and prescription costs increased (PDF) by more than 12.5%. And a retroactive analysis of recent laws passed in Georgia and Oklahoma found that they eliminated five PBM tools and led to cost increases of up to 12% for PBM clients such as employers, unions and state health plans.
The facts are clear: PBMs promote lower drug costs and better health care.
