Tools & Resources

PBM Policies and Their Impact on Drug and Device Costs

Pharmacy Benefit Managers (PBMs) are third-party entities that manage prescription drug and other benefits for health insurers. They negotiate with both pharmacies and drug manufacturers (as well as some device manufacturers) to control spending, and they can help reduce the overall cost of drug purchases.

Many PBMs have the power to determine what covered medications and devices they will offer (these lists are called “formularies”). Doing so has an effect on what patients can get through their insurance, and therefore on patients’ out-of-pocket costs.  Since 98% of people with diabetes depend on prescription drugs to manage their care, 53% use insulin pump therapy, and 38% use CGMs, the availability of these drugs and devices to people with diabetes is critical.  

PBMs also generate revenue by getting rebates from drug and device companies, and thus there are concerns about whether these rebates should be more transparent to beneficiaries and patients, and even whether rebates—which are structured like commissions—should be reconsidered, since they can favor more pricey products over more affordable options to patients.

American Diabetes Association Presses Congress to Act on Rebate Reform

On September 8, 2023, the American Diabetes Association® (ADA) sent a letter to congressional leadership urging action on legislation to increase transparency in prescription drug rebates and prevent pharmacy benefit manager (PBM) practices from inflating the cost of prescription drugs. “Drug middlemen function at the center of the pharmaceutical supply chain and have virtually unparalleled power to affect drug costs, acting as intermediaries between insurers, manufacturers, and pharmacies,” according to the letter. Drug manufacturers often pay PBMs rebates on their drugs in exchange for coverage, limiting patient access to other therapies and driving up the list price of available drugs. 

Download the Letter