What Is a PDL? Understanding the Role of Prescription Drug Lists

With 6 out of 10 people taking at least one prescription medicine, it’s crucial for consumers and employers to really understand their pharmacy benefits. In particular, knowing what’s on a plan’s prescription drug list (PDL) is necessary to ensure the medications people need are covered. 

That’s where pharmacy benefit managers (PBMs) like SmithRx come in — they help ensure that the drugs that appear on PDLs are cost-effective and accessible. In this post, you’ll learn more about what a prescription drug list is and why it’s important. 

What Is a PDL? 

A prescription drug list (PDL) — also known as a formulary — is a list of all the drugs covered under a health insurance plan. The PDL can include both brand-name and generic drugs that have been vetted and approved by the U.S. Food and Drug Administration (FDA). 

PDLs are often divided into tiers, with the lower tiers generally having lower out-of-pocket costs and the higher tiers consisting of more expensive brand-name drugs. 

Understanding Pharmacy Benefit Management

To help make the drugs on a PDL more affordable, health insurers, employers, and other healthcare payers will often turn to pharmacy benefit managers (PBMs) for help. PBMs work behind the scenes to negotiate lower drug costs with manufacturers, pharmacies, and insurers.  

Additionally, PBMs also help shape what drugs appear in a plan’s PDL. In combination with their negotiations, PBMs play an important role for employers and their employees by lowering drug prices and curbing healthcare spending. 

The Role of PDLs in Prescription Drug Coverage

Prescription drug lists are often determined by a committee made up of a mix of primary care doctors, specialty doctors, and pharmacists. The committee will include a wide range of brand-name and generic drugs based on availability, effectiveness, safety, and cost. PDLs will commonly only feature drugs that have a proven health benefit (so lifestyle drugs such as supplements or cosmetic drugs aren’t usually included). 

The committee will also regularly reassess the PDL to see if there are new drug options available that would better serve consumers, such as a cheaper generic version or a new drug more effective at addressing a certain issue. PDLs play a key role in controlling prescription drug costs because they provide a wide range of options that are covered by insurance (to minimize out-of-pocket costs). 

Benefits of Transparent PBM Solutions

Even though pharmacy benefit managers play a key role in determining what drugs appear on PDLs and the final costs to consumers, many PBMs have also faced scrutiny for the lack of transparency in their processes. Because they essentially act as middlemen between drug manufacturers, pharmacies, and insurers, it’s not always clear why certain drugs were picked or how much of the rebates they receive are being kept vs. passed through to consumers. 

That’s why transparent PBMs like SmithRx make a world of difference to self-insured employers. With a simple “per member, per month” (PMPM) cost-based model, transparent PBMs pass through cost savings to consumers to ensure the lowest possible price for each drug. 

On the other hand, PBMs that rely on discount-based models can create more opacity around drug pricing for insurers and employers. This is because traditional PBMs use “spread pricing” to generate revenue. With this approach, they may reimburse the pharmacy for a drug but then charge a health plan more for the same drug, keeping the difference for themselves.

Sometimes, PBMs will be held to a guaranteed discount percentage to try and curb the practice of spread pricing, but this can also lead to PBMs increasing prices for their clients or picking more expensive drugs (with higher rebates) for the PDL. 

This leads to pricing that sounds favorable to consumers but is really only good for the PBMs. For example, a traditional PBM might provide a 50% discount on a drug. That sounds like a great deal, but a pharmacy benefit manager who uses a cost-based PMPM model may find a drug that’s considerably cheaper than the discounted drug. 

Ultimately, transparent PBMs help reduce the overall costs to the plan and the beneficiaries, as well as simplify an already complex process for many consumers. 

Lower Costs in Your PDL With a Transparent PBM

Many factors determine which drugs appear in your prescription drug list and how much they cost, but PBMs definitely play a significant role in both. To help mitigate these factors and lower your plan’s cost, you’ll want to turn to transparent PBMs to avoid spread pricing and more expensive alternatives getting placed on a plan’s PDL. 

Ready to optimize your pharmacy benefits management strategy? Explore our transparent PBM solutions today and take control of your prescription drug coverage and costs.

Prescription Drug List FAQs

What is a prescription drug list (PDL)? 

A prescription drug list (PDL) is a comprehensive list of all the drugs covered under a health insurance plan. 

Who creates and maintains PDLs?

The drugs that appear on a PDL are determined by a committee of health professionals. Pharmacy benefit managers (PBMs) can also play a role in the creation of the PDL. The committee will reassess the list regularly to add, remove, or swap out prescription drugs as necessary. 

What are the benefits of understanding and effectively utilizing PDLs?

Drugs on a PDL are covered under a health plan, which means they typically have lower out-of-pocket costs for consumers. When an employer has a PDL with a good mix of generic and brand-name drugs, this results in a better benefits experience for their employees. In turn, this can help the consumers access the crucial drugs they need, as well as boost retention and satisfaction. 

How do transparent PBM solutions enhance PDL management?

Pharmacy pricing has traditionally relied on discounts, but rebate processes and spread pricing practices mean employers and consumers don’t always end up with the best price. Transparent PBMs will use cost-based models to secure the best possible price — discount or no discount — to save everyone money.