1. The Basics of Pharmacy Benefit Management (PBM)
Dominic Vu, Pharm.D., R.Ph.
Director of Pharmacy Services

2. Background
Memorial Hermann Health Plan (MHHP) is owned by Memorial Hermann Health System with the purpose of focused utilization of Memorial Hermann facilities and affiliated organizations.
A Health Plan is a legal entity that provides for coverage of designated health services such as vision, dental, medical, and pharmacy services needed by plan members for a fixed, prepaid premium. Health plans are marketed directly to individual members and employer groups.

3. Objectives & Introductions
Provide basic components of a PBM function and business model
Define PBM relationship with Health Plans
Understand formulary management
Understand utilization management programs
Manage Care impact for students
Q & A

4. What is a PBM?
A Pharmacy Benefit Manager (PBM) is a third party vendor that provides programs and services designed to maximize drug effectiveness and contain drug expenditures.

5. Do you work for a PBM? NO. They work for me.
A PBM seeks to do business with Health Plans to manage the Health Plan’s pharmacy or medical drug benefits.
Director of Pharmacy Service owns the vendor relationship and ensures quality of service for delegated functions.

6. What Services do PBMs provide?
Serve as middleman between health plans and wholesalers or pharmaceutical companies
Administrative services in processing and analyzing prescription claims
Contracting with a network of pharmacies
Negotiating rebate arrangements
Developing and managing formularies and prior authorization programs

7. What Services do PBMs provide?
Operating mail order pharmacies and mail order claims
Maintaining clinical programs to ensure patient compliance
Performing drug utilization review
Offering specialty pharmacies and distribution services

8. How does a PBM work?

9. Key Pharmacy Terms
NDC – National Drug Code Number assigned by FDA to identify drugs marketed in the United States. AWP – Average Wholesale Price National average of list prices by wholesalers

10. How do most PBM earn their income?

11. Tiered Formularies
Drugs are placed on a tiered benefit plan design according to clinical and cost data
MHHP offers 4 and 5 tier plans
Drugs placed on Tier 1 and 2 have the lowest copays and are typically generics or lower cost branded drugs
Drugs on higher tiers have higher copays and typically are most costlier and/or specialty drugs

12. Utilization Management Programs
These programs include:
Prior Authorization
Quantity Limit
Step Therapy
Dose optimization
Fraud, Waste, and Abuse
Opioid Management
Compound drug management

13. Factors Influencing Pharmacy Trends

14. This piqued my interest
Where can I learn more? Is this right for me? How do I know? I’m only a P2/P3 student.

15. The power of Google

16. Minimum Skillset for Success
At a minimum possess the following:
•  Knowledge, decision making, and critical thinking abilities  
•  Communication abilities
•  Leadership abilities
•  Lifelong learning abilities
•  General business management abilities
Managed Care offers a unique mix of business and clinical opportunities.

17. For more information: