Pharmacy benefit management helps manage prescription drug costs and benefits for employers and health insurance companies. PBMs help negotiate discounts and rebates from drug manufacturers, create formularies for prescription coverage, and process and pay prescription drug claims. They work with health insurers, employers, unions and government employee plans to develop customized prescription drug benefits for their members or employees.
The global pharmacy benefit management market is estimated to be valued at US$ 858.38 Bn in 2023 and is expected to exhibit a CAGR of 8.6% over the forecast period 2023 to 2030, as highlighted in a new report published by Coherent Market Insights.
Market Dynamics:
Rising healthcare expenditure is one of the key drivers propelling the growth of the pharmacy benefit management market. Healthcare costs around the world have witnessed a steep rise over the past few decades. According to data by the Centers for Medicare and Medicaid Services, national healthcare expenditure in the U.S. rose to $3.8 trillion in 2019, accounting for 17.7% of GDP. High cost of drugs has been a major contributor to rising healthcare costs. PBMs help control drug costs through negotiations and formulary management, thereby helping lower healthcare expenditure. They negotiate rebates and discounts from drug manufacturers and pass on a portion of these savings to health plans and employers. This helps make prescription drugs more affordable. Effective management of pharmacy benefits through tools such as step therapy and prior authorization deployed by PBMs is estimated to save billions of dollars annually in prescription drug spending in the U.S.
SWOT Analysis
Strength:
- Pharmacy benefit managers help lower prescription drug costs for health insurance plans by negotiating discounts and rebates with drug manufacturers and pharmacies. This reduced healthcare expenditure is expected to drive market growth over the forecast period.
- They provide improved access to medications by maintaining a large nationwide network of pharmacies within their formulary where insured individuals can fill prescriptions at reduced costs. This ease of access increases adherence to prescription drug regimens.
- Well established players in the market have strong capabilities for developing and managing prescription drug benefits programs tailored for both public and private health plans.
Weakness:
- PBMs can potentially face conflicts of interest by pursuing profits over patients' well being. For example, steering customers to specific pharmacies or drugs for higher rebates instead of considering all treatment options.
- Lack of transparency in their operations and pricing structures raises concerns about fair competition in the market.
Opportunity:
- Growth of specialty drug spending including high cost biologics and orphan drugs is expected to drive need for innovative models and specialized services by PBMs to control related expenses.
- Increasing adoption of value-based care and shift towards outcomes-based contracts presents an opportunity for PBMs to play a larger role in improving health outcomes through strategic partnerships.
- Emergence of new therapies based on advanced technologies like gene and cell therapies will likely expand the services offered by PBMs to develop customized management programs.
Threats:
- Intense competition within the industry poses pricing pressures that can squeeze operating margins.
- Scrutiny by regulatory agencies and calls for increased transparency in operations from policymakers and payers.
Key Takeaways
The global Pharmacy Benefit Management market is expected to witness high growth over the forecast period of 2023 to 2030 supported by rising healthcare costs, increasing prescription drug spending, and growing elder population globally. The market size is projected to reach US$ 858.38 Bn by 2024.
North America currently dominates the market and is expected to maintain its leading position through 2030 owing to well established healthcare infrastructure and presence of large insurance payers in the region driving early adoption of specialized PBM services. Asia Pacific is likely to offer lucrative opportunities and emerge as the fastest growing regional market spurred by growing insured population, improving access to healthcare, and increasing healthcare expenditure in major economies like China and India.
Key players operating in the Pharmacy Benefit Management market are CVS Health, Optum, SS&Tecnologies, Inc., Elixir Rx Solutions, LLC, and Centene Corporation (Envolve Health), among others. CVS Health is currently the leading PBM in the market and leverages its retail pharmacy network and health plan business in delivering integrated benefits solutions. Optum aims to strengthen its position through investments in digital health and specialized clinical programs
