blue connect dots

Myndshft Blog

blue connect dots

October 4, 2023

Rebates, Discounts, and Formularies: How PBMs Shape Medication Access & the Benefits of Automating Prior Authorizations for Pharma and Medical Benefits

by Susan Lawson-Dawson | Healthcare Technology, Prior Authorization

As professionals deeply involved in patient care, understanding the complex dynamics of medication access represents a pivotal aspect of your role. Prescription medications are often the cornerstone of treating numerous health conditions, but how these medications are priced, accessed, and distributed can be enigmatic, to say the least. Some medications fall under medical benefits, such as injection or infusions of biologics for rheumatoid arthritis. Others, those self-administered by the patient, fall under pharmacy benefits.  That’s where Pharmacy Benefit Managers (PBMs) enter the picture. This adds yet another layer to the already complicated world of prior authorizations, which often serves as a gatekeeper between patients and their treatments. Automating prior authorizations unlocks that gate, helping patients access needed medications and services faster.

PBMs: The middlemen between pills and patients

What Are PBMs? Pharmacy Benefit Managers, or PBMs, act as the middlemen between insurers, pharmacies, and sometimes the patients themselves. They construct formularies, negotiate drug prices, and essentially, decide which medications are “preferred” and which are not. 

Take formulary design, for instance. PBMs develop and manage drug formularies, which are lists of preferred medications covered by insurance plans. Drugs not on the list might not be covered or could require higher out-of-pocket costs from patients. Understanding the dynamics of formularies can help you better navigate medication options for your patients. For instance, when prescribing, you may opt for a drug that is part of your patient’s insurance formulary to ensure they can afford the medication.

PBMs also use a familiar protocol leveraged by payers for medical benefits: step-therapy.  This approach requires patients to try cheaper alternatives before “stepping up” to more costly or brand-name medications. This can influence medication access, particularly for patients with complex or severe conditions.

In addition, many PBMs own or have partnerships with mail-order pharmacies, directing consumers to get their medications via mail. This can be convenient for some but may limit immediate access to medications for others.

The impact of rebates and discounts

Ever wonder why one brand-name drug is less expensive than its equally effective competitor? The answer often lies in the rebates and discounts that PBMs negotiate with pharmaceutical companies. In a nutshell, these companies offer price reductions to make their medication more appealing to PBMs, who then add the drug to their preferred list, also known as a formulary.

However, the savings are not always passed on to the consumer, and PBMs have been criticized for their lack of transparency in this area. 

This criticism has evolved into increased scrutiny by Congress, State legislatures, and other healthcare stakeholders. For example, in August, the Oregon State Pharmacy Association (OSPA) and the National Community Pharmacists Association (NCPA) advocated for urgent PBM reforms following an audit that revealed disparities in pharmacy reimbursements and higher charges to Medicare and Medicaid. NCPA CEO B. Douglas Hoey, pharmacist, MBA notes, “Momentum is growing in Washington for investigations into and reforms of PBMs, and this audit adds fuel to the fire. We’re eager partners in getting these policies over the finish line in the state and nationally as well.”

The intricacies of prior authorization

Now, let’s talk about another critical cog in the medication access wheel: prior authorizations. They’re often viewed as administrative hurdles, but they do play a role in controlling healthcare costs and ensuring appropriate patient care. However, the process can be cumbersome, and delays in approvals can adversely affect patient health, which negates the value.  Automating prior authorizations for both medical and pharmacy benefits delivers real advantages. 

Efficiency & Speed

By automating the prior authorization process, approvals process more quickly,  ensuring that patients get timely access to necessary medications. The speed at which automated systems can process prior authorizations outperforms a manual process, shortening transaction time by 90%. 

Improved Accuracy

Automation reduces the possibility of human error. An automated system can sift through the multitude of medical codes, treatment guidelines, and formulary restrictions far more accurately than a manual process.


Automating this process is not just a time-saver; it’s also a cost-saver. It reduces the workload on administrative staff, allowing them to focus on other essential tasks that require human intervention.

Enhanced Patient Care

Perhaps most importantly, automation expedites patient access to medications and treatments, contributing to better health outcomes.

Delivering smarter, more efficient and compassionate care

Understanding the role of PBMs and the importance of automating prior authorizations can vastly improve your ability to provide optimal patient care. These aren’t just administrative details; they’re pivotal aspects that shape medication access and, by extension, the well-being of your patients. By staying informed and leveraging technology, you can make a meaningful difference in your practice and for your patients.

Ready to get started?  Connect with Myndshft to learn more.