Pharmacy Benefit Manager Expert
Pharmacy Benefit Managers - U.S. Pharmacy Distribution and Reimbursement System

Pharmacy Benefit Manager Expert

Pharmacy Benefit Managers expert witness (also known as PBM expert witness) must comprehend that Drug Prices are complex. First some introductory concepts then citations to details. Pharmacy Benefit Managers (PBMs) evolved over a few decades in the drug prices business and intersect the flow of physical drugs, flow of funds, and medical necessity determinations for health plans.

I. In healthcare the intersection of demand, price, quality and sources of suppliers alone does not determine whether pricing is appropriate. Medical necessity, a complex method of determining whether a product or service should be used is also a factor. Medical necessity is used by payors, including private insurance, Medicare and Medicaid to determine whether a medical procedure should be provided at all. (See Drug Pricing Legislation and Inefficient Markets Theory – No World Borders)

II. Drugs are categorized by over 10 different classification systems, however the National Drug Code (NDC) (see National Drug Code Directory), the Generic Product Identifier (GPI) (see Medi-Span® Generic Product Identifier (GPI)), and RxNorm used extensively for electronic prescribing are important standards. (See…), (see also RxNorm Overview)  Pharmacy benefit managers use one of these standards.  See other posts on this web site.

III. There are three concepts that are important to understand in pharmaceutical / drug pricing. The first is the flow of physical drugs. The second is flow of funds. the third is eligibility determination for coverage of drug costs by insurance.  Pharmacy Benefit Managers are central in this process in many cases.

(For more information see my recent answer that discusses drug pricing and pharmacy benefit managers (PBMs) on Quora at

PBMs collect payments from health plans and receive share of rebates from manufacturers are issued back to the health plan.  PMBs manage a complex task in the drug supply and beneficiary reimbursement segment of health care.  Drug prices are set by a complex set of methods, contractual understandings as well as market customary charges and reimbursement.

Pharmacy Benefit Manager experts must understand the flow of funds.  The Drug manufacturers issue negotiated discounts and rebates for drugs based on volume, market share, formulary placement). PBMs issue contracts to health plans, generally pricing their coverage for drugs at WAC. WAC can be used correctly or it can be manipulated, based for example on last in first out (LIFO) or first in first out (FIFO) pricing. The purchase / payment lots can vary from a small volume of drugs at high price point, or the same drug purchased in high volume at a lower price point. If Pharmacy Benefit Managers contract for a LIFO based WAC they can purchase in high volume at low price to decrease the price point, then purchase a small amount at high price and charge based on LIFO. This can yield artificially high profits. This is not to say that all PBMs operate in this manner, but the use of analytics combined with a detail knowledge of drug classification taxonomies is essential to determine if contractural arrangements are being met.  Pharmacy Benefit Managers are integral to this process and can be audited using complete NDC codes.

Related Posts

Medicare Part D Expert Witness

Drug Pricing Expert Witness Methodology

Drug Pricing Expert and Drug Classification

Michael F. Arrigo

Michael is Managing Partner & CEO of No World Borders, a leading healthcare management and IT consulting firm. He serves as an expert witness in Federal and State Court and was recently ruled as an expert by a 9th Circuit Federal Judge. He serves as a patent expert witness on intellectual property disputes, both as a Technical Expert and a Damages expert. He leads a team that provides Cybersecurity best practices for healthcare clients, ICD-10 Consulting, Meaningful Use of Electronic Health Records. He advises legal teams as an expert witness in HIPAA Privacy and Security, medical coding and billing and usual and customary cost of care, the Affordable Care Act and benefits enrollment, white collar crime, False Claims Act, Anti-Kickback, Stark Law, Insurance Fraud, payor-provider disputes, and consults to venture capital and private equity firms on mHealth, Cloud Computing in Healthcare, and Software as a Service. He advises self-insured employers on cost of care and regulations. Arrigo was recently retained by the U.S. Department of Justice (DOJ) regarding a significant false claims act investigation. He has provided opinions on over $1 billion in health care claims and due diligence on over $8 billion in healthcare mergers and acquisitions. Education: UC Irvine - Economics and Computer Science, University of Southern California - Business, studies at Stanford Medical School - Biomedical Informatics, studies at Harvard Medical School - Bioethics. Trained in over 10 medical specialties in medical billing and coding. Trained by U.S. Patent and Trademark Office (USPTO) and PTAB Judges on patent statutes, rules and case law (as a non-attorney to better advise clients on Technical and Damages aspects of patent construction and claims). Mr. Arrigo has been quoted in the Wall Street Journal, New York Times, and National Public Radio.

Leave a Reply