Prescription Drug Benefits: Cost Management Issues for Medicare

Little attention has been devoted in policy circles as to how Medicare would manage an outpatient prescription drug benefit. This article, first, discusses the role of the pharmacy benefits manager (PBM), the entity that processes claims and otherwise helps administer the benefit. It then discusses the major decisions that will be necessary regarding such matters as: which drugs should be covered; how broad should the pharmacy network be; whether there should be incentives to obtain generic rather than brand-name drugs when available; for drugs with no generic equivalent, should there be incentives to obtain less expensive, medically appropriate brand-name drugs; and how should prescription drug utilization be managed.