PBMs are primarily responsible for developing and maintaining the formulary, contracting with pharmacies, negotiating discounts and rebates with drug manufacturers, and processing and paying prescription drug claims.
While drug distributors convert 45% of their gross profit to EBITDA, and insurers and pharmacies around 30%, PBMs convert 85%.
Just three PBMs control eighty percent of the prescription market, driving enough revenue to put them way ahead of all drug manufacturers on the Fortune 500.
Express Scripts, by some estimates, the company’s profit per prescription has increased an average of 38% every year between 2003 and 2016. That kind of growth has landed Express Scripts at number 22 on the Fortune 500 list in 2017.