The U.S. pharmacy benefit management market size is anticipated to surpass around USD 861.5 billion by 2030 with a CAGR of 9.05% over the forecast period 2022 to 2030.
The U.S. pharmacy benefit management market size is anticipated to surpass around USD 861.5 billion by 2030 with a CAGR of 9.05% over the forecast period 2022 to 2030. The industry size of pharmacy benefit management in the Unites Sates was accounted for USD 469.74 billion in 2023.
The U.S. pharmacy benefit management market plays a vital role in the healthcare landscape by facilitating prescription drug distribution and management for various stakeholders. PBMs are intermediaries that negotiate with drug manufacturers and pharmacies on behalf of health insurance plans, employers and government programs. The market players in the collectively manage a significant portion of prescription claims, these PBMs engage in formulary management and drug price negotiations. As the overall healthcare landscape continues to evolve, the United States PBM market remains a dynamics sector that significantly impacts prescription drug accessibility and affordability.
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Pharmacy benefit managers (PBMs) act as middlemen between insurance providers and pharmaceutical manufacturers. According to the National Association of Insurance Commissioners, there are approximately 66 PBM companies in the U.S., overseeing the pharmacy benefits of over 266 million Americans. The demand for PBM services is increasing due to more insurance providers establishing in-house pharmacy benefit groups to manage their covered populations. PBM systems help reduce overall costs by consolidating health plan customers into larger networks, facilitating negotiations and discounts.
The market’s growth is fueled by vertical integration, particularly following two major alliances: CVS-Aetna and Cigna-Express Scripts. These mergers are expected to significantly alter supply chain dynamics in the coming years. Collaborations between PBM organizations and health insurance companies are projected to further stimulate market growth and enhance PBMs’ role in decision-making processes. Such partnerships will improve the affordability and customization of health insurance plans, offering more options through better alignment with healthcare professionals.
Most drugs on the market have similar mechanisms of action, leading to minimal differences between active pharmaceutical ingredients (APIs) and increased price sensitivity. PBMs publish drug formularies that list all medications covered under their benefit plans, encouraging manufacturers to offer discounts. Manufacturers who include their drugs in PBM formularies compensate PBMs significantly. This grants PBMs additional influence over prescribing decisions through requirements like prior authorization, even allowing them to intervene in patient treatments.
The rising prevalence of chronic diseases has heightened demand for treatment options. Consequently, some large pharmaceutical companies focus on producing expensive branded drugs, contributing to a significant increase in drug costs in recent years. For example, a study published in Pharmaceutical Technology revealed a 4.0% increase in U.S. drug prices in 2021, breaking the previous modest upward trend. Additionally, according to SingleCare Administrators, prices for single-prescription medications also rose by 5% in 2021.
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Report Highlights:
- By business model, the standalone PBM segment dominated with in 2023. The dominance of the segment is attributed to the flexibility of such business models along with the ease of adaptability.
- By services, the specialty pharmacies segment dominated the market in 2023. An increasing number of chronic diseases and rare conditions and the rising concerns about convenience to patients are driving the growth of the segment.
- By end-user, the commercial segment dominated the market with the highest growth in 2023 as the large number of employees are covered with health insurance plans with the substantial focus on health insurances and plans by the U.S. government.
Pharmacy Benefit Management (PBM) plays a crucial role in the United States healthcare system for several reasons:
- Cost Containment: PBMs negotiate drug prices with pharmaceutical manufacturers, ensuring that their clients, such as health insurance plans and employers, get medications at discounted rates. This helps contain costs for both patients and payers.
- Formulary Management: PBMs develop formularies, which are lists of preferred medications covered by insurance plans. By promoting the use of generic drugs and negotiating rebates from pharmaceutical companies, PBMs help control medication costs and ensure access to affordable treatments.
- Utilization Management: PBMs implement strategies such as prior authorization and step therapy to ensure appropriate utilization of medications. These measures help prevent unnecessary spending on expensive drugs and encourage the use of cost-effective alternatives.
- Patient Care: PBMs provide services like medication therapy management (MTM) and adherence programs to improve patient outcomes. By monitoring medication usage and providing educational resources, PBMs help patients better manage their conditions and avoid adverse drug interactions.
- Administrative Efficiency: PBMs handle various administrative tasks, including claims processing, pharmacy network management, and benefit design. By streamlining these processes, PBMs reduce administrative burden for insurers, employers, and pharmacies, ultimately improving efficiency and reducing costs.
- Data Analytics: PBMs analyze prescription drug data to identify trends, monitor drug utilization patterns, and assess the effectiveness of interventions. This data-driven approach allows PBMs to continually refine their strategies and optimize medication management for better outcomes and lower costs.
Overall, Pharmacy Benefit Management is essential in the United States healthcare system for its role in cost containment, formulary management, utilization management, patient care, administrative efficiency, and data analytics. By addressing these aspects, PBMs contribute to the affordability, accessibility, and quality of healthcare services related to prescription medications.
Market Dynamics
Driver:
Improved patient outcomes
PBM firms assist in maintaining safe drug use practices and ensuring appropriate medication consumption by lowering the cost of prescription medications. Pharmacy benefit administrators can aid in averting up to one billion pharmaceutical errors, according to the Pharmaceutical Care Management Association, or PCMAT. The business organization also stated that PBMs help diabetic patients maintain their treatment regimens, hence lowering their risks for renal disease, heart failure, stroke, and amputations. Additionally, managers are thought to benefit people who have multiple sclerosis and rheumatoid arthritis. Considering these elements, the improved outcomes offered by PBM services are expected to maintain the growth of the market in the upcoming years.
Restraint:
Protocol restrictions
Formulary restrictions and step protocols, implemented to control costs, can sometimes hinder the patient’s access to the most appropriate treatments, leading to concerns about patient outcomes. The opioid epidemic has also spotlighted challenges in managing pain medications effectively and preventing abuse. Moreover, the potential for conflicts of interest arises as PBMs are involved in negotiations with drug manufacturers, pharmacies and insurers, potentially impacting the affordability and accessibility of medications for patients.
Opportunity:
Integration of telehealth
Telehealth integration presents significant opportunities in the US pharmacy benefit management market. By seamlessly incorporating telehealth services into PBMs, healthcare providers can offer convenient virtual consultations and medication management to patients. This integration enhances access to healthcare, particularly for individuals in remote areas. Furthermore, integration can lead to improved medication adherence and management. Patients can receive real-time guidance from pharmacists, reducing the risk of medication errors and adverse reactions.
Challenge:
Fluctuating drug prices
The fluctuating or escalating costs of prescription drugs present a significant challenge for the market. Rising or continuously changing drug prices strain the PBM industry’s efforts to balance cost-effectiveness and quality healthcare. This trend places a burden on patients, employers and insurers, driving the overall healthcare expenditures. Furthermore, the complexity of drug pricing structures complicates PBMs task of determining formularies and coverage options. Navigating these intricacies becomes challenging as new high-cost specialty drugs enter the market.
Business Model Insights
The standalone PBM segment held the largest revenue share of 37.9% in 2022. Major players such as CVS Health and Express Scripts who underwent major mergers cater to this segment. Such mergers are anticipated to allow drug manufacturers to manage pricing policies and understand the pricing information of competitors. The market experienced consolidations between PBMs and health insurers leading to the strengthening of key players in the market.
PBM uses its scale to negotiate contracts between manufacturers and retailers, secure drug discounts, and determine which drugs qualify for various health care plans. Retail pharmacies are undertaking various strategic initiatives to include PBM services. For instance, in October 2019, Centene Corporation, Walgreens, and RxAdvance announced a strategic partnership to implement an innovative pharmacy management model aimed at increasing transparency, improving the customer experience, and ultimately delivering better healthcare outcomes at lower costs.
The health insurance providers segment is anticipated to expand owing to the increasing access to public health insurance and the rising number of people insured under commercial insurance. Due to the increasing number of beneficiaries, many payers prefer to have in-house PBM, which is driving segment growth. Furthermore, many insurers are acquiring PBMs or partnering with them to develop their own PBM platform. For instance, in December 2019, Humana announced the acquisition of Enclara Healthcare, a hospice PBM provider.
End-use Insights
The commercial segment held the maximum revenue and is estimated to dominate the market throughout the forecast period. The majority of U.S. employees are enrolled under commercial private insurance plans to benefit from the copay system for high-cost drugs. According to the Congressional Research Service, around 211 million people were covered by private insurance in 2020, combining group and non-group insurance.
Federal support is significant for government employees wherein premiums vary for different health plans and are paid in part by employers and employees. Employers usually pay up to 72.0% of the total amount in an average plan for self-only or family coverage while employees pay the rest. As per the Congressional Research Service, Medicaid covered 58 million people, Medicare covered 60 million people, and 12 million were covered under military insurance in 2020.
Recent Developments:
- In Aug 2023, David Blair an MD and Healthcare service executive at BETHESDA announced the launch of a new pharmacy benefit management company “LucyRx” to provide the health plan at the national level, and individual solutions to effectively management of prescriptive costs.
- In Aug 2023, a new-generation pharmacy benefits management company SmithRx and TheracosBio announced that access to TheracosBio’s Brenzavvy (bexagliflozin) with the collaboration of Mark Cuban cost-plus drug company for the FDA-approved oral medication for adults with type 2 diabetes.
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