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September 11, 2023

How To Improve the PBM Value Chain

For companies operating in the complex healthcare environment, Pharmacy Benefits Management (PBM) is pivotal for charting the way forward. The PBM value chain is a series of interconnected activities and stakeholders, all working to ensure that pharmaceutical products are efficiently developed, produced, and distributed. This value chain determines drug pricing, reimbursement policies, and ensures patient access to essential treatments. As the pharmaceutical landscape continues to evolve, understanding and optimizing the PBM value chain is critical to enable the industry to deliver value-driven healthcare solutions.

Stakeholders in the PBM Value Chain

So, who are the stakeholders in the PBM value chain, and what are their roles?

  • Pharmacy Benefit Managers: Often operating behind the scenes, PBMs are the linchpins in the value chain. They serve as administrators, determining how patients access their medications and at what cost. PBMs play a pivotal role in shaping the pharmaceutical industry by negotiating drug prices, rebates, and formularies.
  • Health Insurance Plans: These entities are closely linked with PBMs. Health insurance plans collaborate closely with PBMs to outline medication coverage policies and set pricing structures. Their decisions directly impact the affordability and accessibility of drugs for patients.
  • Pharmacies: As the front-line entities, pharmacies are where the rubber meets the road. They are the touchpoints where patients collect their medications, seek advice, and gain insights into their treatments. Pharmacies bridge the gap between the theoretical aspects of drug distribution and the practicalities of patient care.
  • Patients: At the heart of the PBM value chain are the patients. They are the end consumers, relying on this intricate system to access life-saving medications, manage chronic conditions, and improve their overall quality of life. Their experiences, feedback, and needs drive many decisions across the value chain.
  • Healthcare Providers: These are the medical professionals – doctors, nurses, and specialists – who prescribe medications based on their patients’ needs. Their primary goal is to ensure optimal treatment outcomes. They rely on the PBM value chain to provide a diverse range of effective medication options, allowing them to tailor treatments to individual patient needs.

Understanding each stakeholder’s role and contributions is essential for navigating and optimizing the PBM value chain effectively.

The Role and Influence of PBMs

Pharmacy benefit managers often operate in the background but their influence impacts various facets of the PBM value chain. Some aspects of PBMs’ multifaceted role include:

1. Facilitating Relationships Between Health Insurance Plans and Pharmacies

One of the primary PBM roles is acting as intermediaries between health insurance plans and pharmacies. PBMs negotiate drug prices on behalf of insurance companies, ensuring that patients receive medications at affordable rates. Additionally, they develop and maintain formularies or lists of approved drugs that insurance plans will cover. Doing so helps streamline the process for pharmacies, ensuring patients receive their medications without unnecessary delays or complications.

2. Streamlining the Pharmacy Benefit Process

PBMs have a significant impact on the pharmacy benefit process, from prescription to refill. They implement electronic prescribing systems, reducing errors and speeding up the prescription process. PBMs manage mail-order pharmacy services, allowing patients to receive their medications directly at their doorstep. They also oversee medication therapy, ensuring patients are on the correct drug regimens and adhering to their treatments. All these efforts result in a more efficient, patient-friendly system.

3. Addressing Misconceptions and Criticisms

Like any influential entity, PBMs are not without their critics. Some common criticisms revolve around their role in drug pricing and perceived lack of transparency. However, it’s essential to understand that PBMs operate in a complex environment, balancing the needs of patients, pharmacies, and insurance companies. Their primary goal is to ensure that patients have access to affordable medications. While there’s always room for improvement, many criticisms levied against PBMs stem from misconceptions or a lack of understanding of their intricate role in the PBM value chain.

Essentially, PBMs are pivotal players in the pharmaceutical industry, ensuring the system runs smoothly and efficiently. Their influence is vast, and their contributions are invaluable in delivering optimal patient care.

Trends Affecting the PBM Value Chain

Like many other industries, the pharmaceutical environment is in a state of flux, influenced by various emerging trends. Driven by technological advancements, regulatory changes, and evolving consumer expectations, these trends reshape the PBM value chain. Some of the most prominent trends that stakeholders face include the following:

  • A Demand for Transparency and Accountability: In our current information-driven age, there’s a growing call for transparency across all sectors. Pharmaceutical stakeholders from patients to regulators demand clearer insights into drug pricing, sourcing, and distribution processes. This push for transparency aims to ensure that the industry operates ethically and that patients receive fair value. Moreover, with transparency comes the need for greater accountability, ensuring that entities within the value chain are held responsible for their actions and decisions.
  • A Shift Towards Patient-Centric Approaches: The days of a one-size-fits-all approach in healthcare are waning. There’s a discernible shift towards more personalized, patient-centric healthcare solutions. This trend emphasizes tailoring treatments and medications to individual patient needs, preferences, and genetic makeups. As a result, the PBM value chain is evolving to accommodate more personalized drug development and distribution processes, ensuring that patients receive the most effective treatments for their unique conditions.
  • Global Supply Chains – Challenges and Opportunities: The pharmaceutical industry’s supply chain is increasingly global, with raw materials often sourced from one continent, processed in another, and distributed worldwide. While this globalization offers opportunities for cost savings and broader market access, it also presents challenges. Issues like geopolitical tensions, trade restrictions, and varying regulatory standards can disrupt the smooth flow of the PBM value chain. However, with these challenges come opportunities for innovation, collaboration, and the development of more resilient supply chain models.

Staying abreast of these trends is crucial for any entity within the PBM value chain. By understanding and adapting to these shifts, stakeholders can ensure they remain competitive, efficient, and, most importantly, deliver the best possible care to patients.

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Digital Transformation of the PBM Value Chain

As the pharmaceutical industry grapples with increasing complexities and demands, digital tools and platforms emerge as game-changers. At the forefront of the digital revolution, a tool like Xevant provides stakeholders with real-time insights into drug utilization, cost trends, and patient behavior. By harnessing the power of data analytics, these insights enable pharmacy benefit managers and other entities to make informed decisions, optimize strategies, and anticipate market shifts.

The digital era also brings with it the promise of automation. In the PBM value chain, automation translates to faster processes, reduced manual interventions, and minimized errors. Whether it’s automating drug approval workflows or streamlining patient communication channels, the benefits are manifold. Automation saves time and translates to significant cost savings, making treatments more affordable and accessible to patients.

One of the longstanding challenges in the pharmaceutical industry has been transparency. Digital tools are addressing this challenge head-on. With blockchain technologies, for instance, stakeholders can track a drug’s journey from manufacturer to patient, ensuring authenticity and quality. Similarly, digital platforms offer patients more visibility into drug pricing, rebates, and alternatives. By fostering transparency, these tools also enhance efficiency, ensuring that the pharmaceutical value chain operates seamlessly and ethically.

In conclusion, the digitalization of the PBM value chain is not just a trend; it’s a necessity. As the industry evolves, embracing digital tools and platforms will ensure it remains agile, transparent, and patient-centric.

3 Ways to Increase Efficiency in the PBM Chain

Efficiency is the linchpin of any successful value chain, and the pharmaceutical sector is no different. The quest for enhanced efficiency becomes paramount as the industry navigates a rapidly changing landscape. Here are some strategies to bolster efficiency in the PBM value chain:

1. Leverage Innovative Solutions to Identify Gaps

Innovative software solutions are powerful allies in the quest for efficiency. These tools, equipped with advanced analytics and machine learning capabilities, can pinpoint problems, revenue leaks, and areas of potential improvement. For instance, platforms can analyze vast datasets to identify patterns in drug utilization, wastage, and patient behavior. By addressing these inefficiencies, stakeholders can optimize operations, reduce costs, and enhance patient outcomes.

2. Prioritize Patient Compliance and Monitoring

The PBM value chain’s efficiency isn’t solely about processes and systems; it’s intrinsically linked to patient behavior. Ensuring patient compliance – that patients take their medications as prescribed – is crucial. Non-compliance can lead to suboptimal treatment outcomes, increased hospitalizations, and higher costs. Digital tools like medication reminders, telehealth platforms, and wearable devices monitor and encourage patient compliance, ensuring that the value chain’s efforts translate to real-world success.

3. Foster Collaboration Among Stakeholders

The PBM value chain is a complex web of interdependent stakeholders, from manufacturers and PBMs to pharmacies and patients. For the chain to operate efficiently, seamless collaboration between these entities is essential. Collaborative approaches, such as joint task forces, shared digital platforms, and regular stakeholder consultations, ensure that the value chain’s various cogs work harmoniously. By fostering open communication and collaboration, stakeholders can address challenges collectively, share best practices, and drive the industry forward.

Increasing efficiency in the PBM value chain is a multifaceted endeavor requiring technological innovation, patient-centric approaches, and collaborative spirit. The industry can ensure optimal value to all its stakeholders by embracing these strategies.

Achieve Better Outcomes and Processes with Xevant

The PBM value chain is a testament to the careful balance between collaboration, innovation, and patient care. Whether adopting cutting-edge digital tools, fostering stronger collaborations, or placing patients at the heart of every decision, the drive to enhance the PBM value chain is relentless. However, for stakeholders ranging from PBMs to healthcare providers, pharmacies, and the patients they serve, the benefits of a streamlined and efficient value chain are numerous. It translates to better patient outcomes, more transparent processes, and a pharmaceutical industry poised to meet future challenges. Explore the innovative solutions Xevant offers by taking advantage of our free trial today and discover the difference it will make for your organization.

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Shane Garduno, VP of PBM Practice


Shane Garduno, VP of PBM Practice

Shane Garduno has over 20 years of healthcare experience with 19 plus years working in the pharmacy benefits management (PBM) industry. The majority of his career has been in account management and leadership roles providing strategic guidance, industry insight and best in class service to various clients including health plans and health systems across the healthcare industry.


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Key Insights to Stay Ahead of the Curve

From the 2023 drug trend report

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