The principal services offered by pharmacy benefit management companies (PBMs) are described. A PBM contracts with employers, insurers, and others to provide accessible and cost-effective benefits to those groups' members. PBMs vary in their organization and services because they originate from different types of businesses. Many PBMs have been formed by publicly traded companies that have combined traditional ways of controlling cost and use, such as formularies, with new elements to form organizations whose primary function is managing the pharmacy benefit. Often, the PBM is paid a fixed amount for which it must provide all contracted services. PBMs may provide pharmacy services themselves (e.g., mail order prescription service is offered by Medco, one of the largest PBMs); more often, they subcontract with others to provide certain services. Full-service PBMs have the following functions: establishing networks of pharmacies for use by plan members; processing claims electronically at the time a prescription is filled and thus maintaining a database on drug use and cost; using these data to generate various reports; encouraging the use of generic products; managing existing formularies, helping to establish customized formularies, or providing a national formulary; providing information to support formulary guidelines (counter-detailing); offering programs in which prescriptions for maintenance medications are filled less frequently with larger amounts, often by mail order; negotiating volume-based rebates from manufacturers; performing drug-use review; developing disease management programs based on clinical practice guidelines and measurements of patient outcome; and evaluating outcomes by combining data on drug therapy with information about other parts of the patient's care.(ABSTRACT TRUNCATED AT 250 WORDS)