By NextBestFitPharmacy benefit managers profit from opaque drug pricing
Three PBMs handle about 80% of prescriptions. Rebates tied to list prices reward higher list prices, spread pricing hides margins, and PBM-owned pharmacies dominate specialty drugs.
Evidence
- The three largest PBMs and affiliates earned over $7.3B dispensing drugs above acquisition cost in 2017–2022 and held 68% of specialty dispensing revenue in 2023.Sources: Federal Trade Commission (2025)
Who's affected
Who is hurt
- People with unaffordable deductibles or coinsurance: List-price-based coinsurance exposes them to higher drug prices.
- Community pharmacies: PBM-owned pharmacies dominate specialty drugs.
- Employers: Opaque spread pricing hides prescription benefit margins.
Who gains while it lasts
- Pharmacy benefit managers and their pharmacies: Rebates and opaque pricing generate revenue for benefit managers and their insurer parents.
- Health insurers, brokers, and their shareholders: Rebates and opaque pricing generate revenue for benefit managers and their insurer parents.
- Drug and device makers: Rebates buy formulary placement for their products.
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Root causes
- Rebates based on list price
- Vertical integration of insurers, PBMs, and pharmacies
Related costs
Open questions
- Who should negotiate drug prices: PBMs, insurers, or a single public buyer?
Solution paths (2)
Open a path for what it fixes, what it creates or worsens, who gains and who loses, precedents, and how it connects to other paths. See all paths as a decision tree.
The public payer negotiates prices directly with manufacturers and pays pharmacies a transparent dispensing fee.
- +Pharmacy benefit managers profit from opaque drug pricing
- −Adds paperwork, coordination, or complexity
- −Limits choice or applies one rule to every setting
PBMs are paid flat fees, must pass rebates through, and may not own pharmacies they steer patients to.
- +Pharmacy benefit managers profit from opaque drug pricing
- −Requires difficult enforcement
- −Takes years, or money up front, before it pays off