Functions Administered by Pharmacy Benefit Managers for SPAPs, 2003

1. THE COMMONWEALTH FUND Rizzo, Fox, Trail, and Crystal, State Pharmacy Assistance Programs: A Chartbook—Updated and Revised, January 2007 Functions Administered by Pharmacy Benefit Managers for SPAPs, 2003 • The Medicare Part D drug benefit is administered by new private entities known as Prescription Drug Plans (PDPs) and Medicare Advantage Prescription Drug (MA-PD) plans. The PDPs include Pharmacy Benefit Management (PBMs) firms and/or insurers that work closely with PBMs. As states may need to coordinate their benefits withPart D, it is important to assess states’ experience with these private entities to date. • Fourteen of the 20 SPAP states for which we have data indicated that they use a PBM to administer some of their program functions. Of those 14 states, almost all used a PBM for processing claims, 12 used a PBM for drug utilization review (DUR)—a review of prescriptions that provides pharmacists and physicians informational warnings about potentially inappropriate prescriptions, nine used a PBM to collect manufacturer’s rebates, and eight used a PBM to negotiate pharmacy reimbursement rates. Only five states used a PBM for eligibility determination, five states used a PBM for negotiating manufacturer rates and three states used a PBM for PDL development. • States that did not use PBMs to negotiate manufacturer rebates or pharmacy reimbursement rates usually have the rebate and/or reimbursement rates set in statute. • In addition to the states that contracted with a PBM, most states used a third-party vendor to process claims.