Pharmacy Benefit Manager Role of a Pharmacy Benefit Manager in Providing Services and Flow of Funds for Prescription Drugs Flow of Funds Services Drug Manufacturer Negotiated rebate Contract directly to supply drugs Negotiate formulary placement Payment for drug Health Plan Pharmacy Benefit Manager Share of rebates Manage drug benefit* Wholesaler Contract directly to supply drugs Administrative fees, payment for drug, and dispensing fees Payment for drug The difference between these payments is called “the spread” Contract directly to dispense drugs Pharmacy Payment for drug and dispensing fee * Includes establishing formulary and patient adherence programs and implementing utilization management tools – such as prior authorization, step therapy, and tiering -- to steer patients toward certain drugs on formulary. Data: Adapted from Congressional Budget Office, “Prescription Drug Pricing in the Private Sector,” January 2007.