By George H. George
Your PBM just charged your plan $2,847 for a prescription. They paid the pharmacy $340. They kept $2,507 as “spread.” You’ll never see it on your invoice.
Here’s the scheme 70% of employers don’t know exists:
Step 1: PBM negotiates 39% rebate from drug manufacturer. Promises formulary placement. Never tells you the percentage.
Step 2: Rebate flows to offshore “rebate aggregator”—a shell company the PBM owns. Deducts “administrative fees” before passing anything through.
Step 3: You get a check for maybe 60% of the original rebate. PBM reports it as “100% passthrough.” Technically true—of what they chose to classify as a rebate.
Step 4: PBM also keeps spread between what they billed you and what they paid the pharmacy. This isn’t even counted in rebate calculations.
The evidence: Michigan uncovered $64M in annual spread pricing overcharges. Maryland found $72M. FTC investigation revealed the Big 3 PBMs control 80% of prescriptions and systematically reimburse independent pharmacies below cost while overcharging employers.
Real case: J&J lawsuit alleges their PBM charged $2,847 for Aubagio while Cash Plus Drugs sold it for $28.40. Same 90-pill script. 100x markup.
What your broker won’t tell you: They get override commissions from PBMs for steering you to opaque contracts. The less you know, the more everyone makes. Except you.
Executive Order signed April 2025 requires DOL to propose PBM fee transparency rules by October 2025. Translation: It’s been this bad for this long that the federal government had to intervene.
You’re not overpaying because drugs cost more. You’re overpaying because four layers of middlemen are extracting profit from transactions you can’t audit.
Both lower drug costs and PBM transparency are possible. One requires firing your current PBM. The other requires a fiduciary audit.
Once upon a time a wise prospect said “You don’t want me to know your business because it won’t be good for you!” Most plan sponsors have no idea what they bought, how it works, and who’s lurking in the shadows taking their cut. This blog was established 18 years ago to change that.
