Who determines the retail price of Medicare Part D drugs?

Many Medicare Part D prescription drug plans use a PBM or Pharmacy Benefit Manager to negotiate the plan's retail drug prices. A Medicare drug plan's PBM might also establish pharmacy networks, offer mail-order pharmacy services, assist with formulary development, and process pharmacy claims.

Since PBMs are responsible for millions of pharmaceutical transactions, a Medicare Part D plan's PBM should have negotiation and bargaining power so that the Medicare Part D plan might offer prescriptions at lower retail prices to their prescription drug plan members.

PBMs can be independent of the Medicare Part D plan or a subsidiary of the Medicare providers. Some examples of major PBMs include Express Scripts and CVS Caremark. (You might notice that these particular PBMs also offer their own Medicare Part D prescription drug plans. )

"Optum" is another large pharmacy benefit manager (PBM) and is associated with UnitedHealth Group (UnitedHealth Care). Here is some Optum information provided by the UnitedHealth Group site:

"OptumRx offers a full spectrum of pharmacy care services that are making drugs more affordable and creating a better experience for consumers, filling roughly 1.3 billion adjusted scripts annually. OptumRx solutions are rooted in evidence-based clinical guidelines. This business makes health care more affordable by helping people find the medications they need at the lowest price, while helping benefit sponsors pay the lowest net cost."

(source as of 08/07/2021: www.unitedhealthgroup.com/who-we-are/businesses/optum.html - see also: www.optum.com/) Please note, retail drug prices change throughout the year.

A PBM can change retail drug prices throughout the Medicare Part D plan coverage year. So, if you have a Medicare Part D plan that includes cost-sharing in the form of coinsurance (for instance, you pay 25% of the retail price), your drug costs will fluctuate throughout the plan year as the PBM changes the retail price - and some people find this cost-uncertainty a bit unsettling.

Choosing a Medicare Part D drug plan with Copayment vs. Coinsurance

If you wish to have consistent coverage costs throughout your Medicare prescription drug plan's Initial Coverage phase, then you may wish to consider a Medicare Part D plan that has cost-sharing in the form of copayment (for instance, you pay $30 for a Tier 2 drug, no matter how the actual retail cost of the drug fluctuates).