The short answer
Spread pricing happens when a pharmacy benefit manager charges your health plan one price for a prescription and pays the pharmacy a lower price. The PBM keeps the difference, which is the spread.
Example: your plan is billed $120 for a 30-day generic. The PBM reimburses the pharmacy $40. The $80 difference stays with the PBM. Nothing on the claim the employer sees shows that $80, because the plan only sees what it was charged.
Why plan sponsors rarely see it
Traditional PBM contracts price drugs against benchmarks such as discounts off Average Wholesale Price, plus guarantees that are measured in aggregate. A plan can hit every guarantee in the contract and still pay a large spread on individual claims.
Unless the contract gives the plan sponsor claim-level data showing both the amount billed to the plan and the amount paid to the pharmacy, the spread cannot be measured. That is why audit rights and data rights matter as much as the discount numbers.
Why it is under scrutiny now
In July 2024 the Federal Trade Commission published an interim staff report on PBMs. It found that the three largest PBMs processed nearly 80% of the roughly 6.6 billion prescriptions dispensed by U.S. pharmacies in 2023.
In February 2026 the Consolidated Appropriations Act, 2026 added PBM reforms for ERISA group health plans, including detailed drug spending reports that show what the plan paid the PBM and what the PBM paid the pharmacy for each drug. See our guide to CAA 2026 PBM reform for the details and effective dates.
Questions to ask your PBM
- Is this contract priced on a pass-through basis, where the plan pays exactly what the pharmacy is paid?
- Will we receive claim-level data showing the plan price and the pharmacy reimbursement for every claim?
- How are you compensated, in dollars, and from which sources?
- What are our audit rights, and who chooses the auditor?