The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants

Dr. David Edward Marcinko; MBA MEd

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Structure, Influence and Ongoing Debate

Pharmacy benefit managers (PBMs) occupy a pivotal yet often misunderstood position in the U.S. healthcare system. Originally created to help employers and insurers manage prescription drug benefits, PBMs have evolved into powerful intermediaries that influence which medications patients receive, how much they pay, and how pharmacies operate. Their expanding role has sparked intense debate about transparency, cost control, and market power. Understanding PBMs requires examining their core functions, economic incentives, and the controversies that shape current policy discussions.

At their foundation, PBMs administer prescription drug plans on behalf of insurers, employers, unions, and government programs. Their responsibilities include negotiating drug prices, managing formularies, processing pharmacy claims, and operating mail‑order or specialty pharmacies. These functions were designed to streamline administrative tasks and leverage purchasing power to secure lower prices. As drug spending grew—particularly for specialty medications—PBMs became central to cost‑containment strategies across the healthcare system.

One of the most influential tools PBMs use is the formulary, a curated list of medications that determines coverage and cost‑sharing. By placing certain drugs in preferred tiers, PBMs can steer patients toward lower‑cost or negotiated options. This system gives PBMs significant leverage when negotiating with pharmaceutical manufacturers. In exchange for favorable placement on the formulary, manufacturers may offer rebates or discounts. PBMs argue that these negotiations reduce overall drug spending for plan sponsors and help keep premiums in check.

However, the rebate system is also at the heart of the criticism directed at PBMs. Critics contend that rebates create misaligned incentives, encouraging PBMs to favor drugs with higher list prices because those drugs often generate larger rebates. Although PBMs typically pass a portion of rebates to insurers or employers, the lack of transparency makes it difficult to determine how much savings ultimately reach patients. As a result, patients may face higher out‑of‑pocket costs at the pharmacy counter, even when insurers benefit from rebate revenue behind the scenes.

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Another area of controversy involves PBMs’ relationships with pharmacies. Many PBMs own or are affiliated with large mail‑order or specialty pharmacies, raising concerns about vertical integration and potential conflicts of interest. Independent pharmacies have long argued that PBMs reimburse them at unsustainably low rates while steering patients toward PBM‑owned alternatives. Practices such as “spread pricing”—where PBMs charge insurers more for a drug than they reimburse the pharmacy—have drawn scrutiny from regulators and lawmakers who question whether PBMs are inflating costs rather than reducing them.

Despite these criticisms, PBMs maintain that they play a crucial role in controlling drug spending. They point to their ability to negotiate lower prices, promote generic substitution, and implement utilization management tools such as prior authorization and step therapy. These mechanisms, PBMs argue, prevent unnecessary or excessively costly prescribing and help ensure that patients receive clinically appropriate treatments. Without PBMs, they claim, drug spending would rise even faster, placing additional strain on employers, insurers, and government programs.

The debate over PBMs has intensified as drug prices continue to rise and public frustration grows. Policymakers across the political spectrum have proposed reforms aimed at increasing transparency, regulating rebate practices, and altering how PBMs are compensated. Some proposals would require PBMs to pass through all rebates to plan sponsors or patients, while others would ban spread pricing or mandate clearer reporting of financial flows. Supporters of reform argue that these measures would reduce hidden incentives and align PBM behavior more closely with patient interests. Opponents caution that overly aggressive regulation could weaken PBMs’ negotiating power and inadvertently increase costs.

Ultimately, the future of PBMs will depend on how the healthcare system balances cost control, transparency, and competition. PBMs emerged to solve real problems in drug benefit management, and they continue to provide services that many insurers and employers rely on. Yet their growing influence and opaque business practices have raised legitimate concerns about accountability and fairness. As policymakers, industry stakeholders, and patient advocates continue to debate the role of PBMs, the challenge will be crafting reforms that preserve their ability to negotiate savings while ensuring that those savings genuinely benefit patients.

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EDUCATION: Books

SPEAKING: Dr. Marcinko will be speaking and lecturing, signing and opining, teaching and preaching, storming and performing at many locations throughout the USA this year! His tour of witty and serious pontifications may be scheduled on a planned or ad-hoc basis; for public or private meetings and gatherings; formally, informally, or over lunch or dinner. All medical societies, financial advisory firms or Broker-Dealers are encouraged to submit an RFP for speaking engagements: CONTACT: Ann Miller RN MHA at MarcinkoAdvisors@outlook.com -OR- http://www.MarcinkoAssociates.com

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