By Bryce Platt
Most people think PBMs just adjudicate pharmacy claims (if they know what a PBM even is). Here’s how they actually make money.
The big 3 PBMs (Pharmacy Benefit Managers) process 80%+ of prescription drug transactions in the U.S. While PBMs provide legitimate services, their revenue streams often expand beyond what most customers are aware of.
Here are three ways PBMs generate billions that most people outside pharmacy don’t know about:
1️⃣ Rebate Retention
- BMs negotiate rebates from drug manufacturers (often 20-50% of list price)
- PBMs are typically expected to pass these savings to employers and health plans
- In practice, a portion of rebates may be retained by PBMs as administrative fees, depending on contract structure and transparency provisions
2️⃣ Spread Pricing - – PBMs charge health plans one price, reimburse pharmacies less
- Ohio’s Medicaid program found spreads averaging 8.8% per prescription
- Across millions of prescriptions, these dollars add up fast
- Example: Generic drug costs pharmacy $12, PBM reimburses $15, charges health plan $20
3️⃣ Specialty Pharmacy Ownership - – They collect processing fees and pharmacy margins on specialty drug claims
- The top 3 PBMs own the top 3 specialty pharmacies
- 50%+ of specialty drugs flow through PBM-owned pharmacies
- This structure can introduce incentives for greater utilization of affiliated pharmacies, a topic frequently raised in policy discussions.
There are even more revenue streams in the infographic!
Many of these revenue streams are now at risk due to the recent passage of the Modernizing and Ensuring PBM Accountability Act and the FTC settlement with Express Scripts.
My post from yesterday covers the Accountability Act.
post
You can find a great breakdown of the FTC settlement from Adam Fein on his blog here.
Today’s Bonus Read by Joshua
What’s happening in Louisiana right now is a case study in why PBM reform is so hard.
In June 2025, Louisiana passed HB 264 (Act 474) to rein in PBMs and protect independent pharmacies. The law was meant to:
• Ban spread pricing
• Stop patient steering to PBM-owned pharmacies
• Require rebates to be passed through
• Ensure pharmacies are paid at or above acquisition cost
• Increase PBM transparency
On paper, it looked like real relief.
In practice? PBMs adapted.
Here’s how:
• Key provisions are delayed or weakly enforced (some not fully effective until 2027)
• Contracts are being restructured to technically comply while preserving PBM profit
• Heavy lobbying and scare campaigns shifted the narrative to “higher costs” and “pharmacy closures”
• Enforcement is still lagging, leaving loopholes wide open
That’s why pharmacists are back in the fight.
The law’s intent was reform. The execution has allowed PBMs to interpret it in their favor, again.
Until enforcement matches legislative intent, passing laws alone won’t fix the problem.
