Two ways a PBM gets paid
A traditional PBM earns revenue from several places at once: spread on claims, a share of manufacturer rebates, and fees that may not appear on the invoice the employer sees. Its pricing to the plan is usually tied to benchmark discounts and guarantees.
A pass-through PBM charges the plan exactly what the pharmacy is paid, passes manufacturer rebates through to the plan, and earns a disclosed administrative fee. The PBM's compensation is visible and measurable.
Why rebates matter
Manufacturer rebates are payments drug makers make in exchange for formulary placement. When a PBM keeps part of those rebates, it has an incentive to prefer higher-list-price drugs that carry bigger rebates, even when a lower-cost option exists.
Under the Consolidated Appropriations Act, 2026, PBMs serving ERISA group health plans must pass through 100% of rebates, fees, alternative discounts and other remuneration tied to drug utilization for contracts entered into, renewed or extended for plan years beginning on or after August 3, 2028. See our CAA 2026 guide.
What true transparency looks like
- Claim-level data at the NDC-11 level, so every drug can be identified exactly.
- Plan price equal to pharmacy reimbursement on every claim.
- All manufacturer revenue passed through and reported.
- Compensation stated in dollars, not hidden inside discounts.
- Unrestricted audit rights with an auditor the plan chooses.
How to compare proposals
Do not compare PBM proposals on discount percentages alone. Re-price your own claims under each proposal, ask each PBM to state its total compensation in dollars, and compare the lowest true net cost rather than the headline discount.