What is the formula for calculating the cost of PBM services?

To determine the cost of Pharmacy Benefit Manager (PBM) services, it is important to understand the components involved in the formula. The correct formula provided sums up various factors relating to the costs incurred in managing pharmacy benefits.

The elements in the formula are as follows:

• AF (Administrative Fees): This includes the fees charged by the PBM for its services, which cover operational costs.

• DF (Dispensing Fees): These are charges associated with the dispensing of medications by pharmacies, reimbursed to the pharmacies through the PBM.

• IC (Ingredient Cost): This is the cost of the actual medications dispensed, which is a significant part of the total expenditure.

• MR (Margin Reduction): This represents any deductions from revenue that the PBM may face, impacting the overall profitability.

• CD (Claims Discount): This includes discounts applied to claims that reduce the payable amount for medications and services.

Correctly summing these costs allows for an accurate representation of the total cost of PBM services. In this context, adding the Administrative Fees, Dispensing Fees, Ingredient Costs, and Margin Reduction, while subtracting the Claims Discount, accurately reflects the overall expenditure related to pharmacy benefit management. This calculation ensures