PBMs sit between drug manufacturers, health plans, employers and pharmacies. They design and manage formularies, negotiate rebates and other payments from manufacturers in exchange for formulary position, build and pay pharmacy networks, process prescription claims, apply utilization management such as prior authorization and step therapy, and often operate mail-order and specialty pharmacies.
The US market is highly concentrated. According to an interim staff report published by the Federal Trade Commission in July 2024, the three largest PBMs processed nearly 80 percent of the roughly 6.6 billion prescriptions dispensed by US pharmacies in 2023.
For manufacturers, PBMs are among the most important customers. Their formulary decisions determine access for tens of millions of people, and the rebates negotiated with them are a large part of the gap between a drug’s list price and what the manufacturer receives, known as gross-to-net.
PBM practices are under active scrutiny from regulators and legislators, so the rules that shape these negotiations may change.