How PBMs Make Money: The Undisclosed Revenue Streams Driving Up Your Healthcare Costs

Your PBM partner should work in your best interests. Yet most traditional pharmacy benefit managers operate with multiple revenue streams that directly conflict with your cost control goals. Understanding how they profit at your expense is the first step toward regaining control of your pharmacy benefits.

Multiple Revenue Sources Create Conflicts of Interest

Traditional PBMs don't operate like other service providers. While most vendors earn revenue through clear fees, PBMs have built complex financial structures with numerous profit centers. Each revenue stream represents a different way costs get shifted from the PBM to your plan and members.

This complexity serves a purpose: it obscures the true cost of services while maximizing PBM margins at your expense.

Spread Pricing: The Basic Markup Strategy

When a medication costs $100, your PBM charges your plan $120 or $130, keeping the difference. This markup appears on virtually every prescription dispensed through your plan.

The spread varies by medication and plan characteristics. You rarely receive visibility into ingredient costs, making it impossible to identify excessive markups. Over time, these spreads compound into substantial PBM revenue while inflating your costs.

With 6.6 billion prescriptions filled annually, even modest per-prescription spreads generate enormous revenue. For a 10,000-member plan, spread pricing easily adds hundreds of thousands in unnecessary annual costs.

Undisclosed Fees Throughout Service Delivery

Traditional PBMs layer numerous fees throughout their operations. These charges exceed cell phone bills in complexity! Common undisclosed fees include:

• Administrative processing fees for basic claim processing

• Network access fees for pharmacy participation

• Clinical program fees for minimal-value programs

• Technology platform fees for standard reporting tools

• Specialty handling fees on high-cost medications

  
  

Each fee represents a separate profit center with minimal correlation to service delivery costs. Plans frequently discover these charges only during detailed contract reviews.

Rebate Retention: Keeping Your Money

Pharmaceutical manufacturers provide rebates to encourage formulary placement. These rebates should flow to your plan to offset medication costs. Traditional PBMs frequently retain portions of these rebates, sometimes keeping significant percentages.

Plans may receive 50%, 70%, or 90% of collected rebates, with the PBM keeping the remainder. For specialty medications with substantial manufacturer rebates, PBM retention can represent thousands of dollars per prescription in undisclosed revenue.

Double Profit Opportunities

Many large PBMs own pharmacies and specialty pharmacies. This creates multiple profit opportunities on each prescription while potentially limiting member choice and inflating costs.

When your PBM owns the specialty pharmacy dispensing medications to your members, it profits from both the management fee and the pharmacy dispensing margin. This dual revenue stream creates incentives to direct medications to owned pharmacies regardless of value to your plan.

Generic and Brand Manipulation

Generic medications should provide substantial savings compared to brand alternatives. Some PBMs manipulate generic pricing to maintain higher margins while reducing savings that should flow to you.

This includes pricing generics at brand costs when substantial price differences should exist, and creating formulary structures that discourage generic utilization despite lower costs.

The DisclosedRx Difference: Fiduciary Structure

DisclosedRx operates as The Fiduciary and Fully Disclosed PBM™, contractually bound to act in your interests rather than maximizing undisclosed revenue. Our structure eliminates traditional PBM conflicts:

Single Revenue Source: One clear administration fee eliminates incentives to inflate costs elsewhere.

100% Pass-Through Pricing: You pay exactly what we pay for medications, with no spread pricing.

100% Rebate Pass-Through: All manufacturer rebates flow directly to your plan.

Channel Optimization: We procure medications through the most cost-effective methods available.

Your Path Forward

Plans that continue with traditional arrangements effectively subsidize PBM profitability while missing substantial cost savings opportunities.

The solution involves partnering with a PBM that aligns its interests with yours through contractual commitments to Full Disclosure and Fiduciary responsibility. When PBM success depends on your success rather than undisclosed revenue generation, both cost control and Member Service improve dramatically.

At DisclosedRx, we believe you deserve to know exactly what your drug costs are, receive all rebates and supply chain credits associated with your drug spend, and experience no shell games, ever. That is our passionate promise as The Fiduciary and Fully Disclosed PBM™.