Pharmacy benefit manager (PBM) transparency determines whether an employer can see what it pays for prescription drugs, how much the PBM keeps, and what a competing pharmacy would charge. Without transparency, employers buy drugs through an intermediary that controls the pricing details. With transparency, employers can audit every claim, compare net costs, and redirect savings back to the plan.
A PBM manages prescription drug benefits for employers and health plans. It sits between drug manufacturers, pharmacies, and the employer, setting prices, moving money, and deciding which drugs appear on the formulary. Prescription drug spending is now one of the fastest-growing parts of employer health plans, and premiums have risen 5 to 7 percent per year while employers fund a system that wastes an estimated 20 to 25 percent of healthcare spending. Opaque drug pricing is an area where employers can recover savings directly.
Where PBM opacity hides money
Three mechanisms do most of the work.
- Spread pricing. The PBM charges the employer one price for a drug and pays the pharmacy a lower price. The difference is spread, and the PBM keeps it without disclosing the amount.
- Rebate retention. Drug manufacturers pay rebates to the PBM. In an opaque contract, the PBM keeps some or all of those rebates instead of passing them to the employer.
- Formulary placement. PBMs sometimes place a drug on a preferred tier because the manufacturer paid a larger rebate, not because it is the lowest net cost for the employer.
Employers cannot audit what they cannot see.
What a transparent PBM contract looks like
A transparent contract uses a pass-through model. The employer pays the PBM a flat administrative fee, receives all manufacturer rebates, and sees the actual ingredient cost and dispensing fee on every prescription. The conversation shifts from discount percentage to net cost.
Under this model, a 30 percent discount means little if the PBM keeps the rebate. A 10 percent discount with full rebate pass-through can be cheaper for the plan. Employers need the claims-level data to make that comparison.
How transparency reduces employer drug spend
- Employers can benchmark ingredient costs against public references and spot overpayments.
- Rebates credited to the plan lower the net cost in the year they are earned.
- Audit rights let employers recover money when invoice amounts do not match network rates.
- Specialty drug prices become visible, so the employer can choose the lowest-cost site of care.
Transparency also changes PBM behavior. A PBM that knows the employer will audit every claim cannot quietly build margin into spread.
What WellthCare does differently
WellthCare Pharmacy™ removes spread pricing and gives employers a direct view of drug cost and PBM compensation. The typical result is 20 to 40 percent drug savings compared with traditional spread-based arrangements. No spread games. Just fair pricing.
In a Health-to-Wealth™ Benefit System, lower drug spend frees dollars that can support preventive care, reward dollars, and automatic retirement contributions. Transparent drug pricing lowers claims, and the savings compound.
Questions to put in front of your broker or PBM
- Does the contract use pass-through pricing or spread pricing?
- What percentage of rebates are credited to the plan?
- What is the PBM's compensation, stated as a flat fee per prescription or per employee per month?
- Do we have full claims-level data and audit rights?
- How are specialty drugs priced and where are they dispensed?
What this means for employers
Employers use PBM transparency to keep drug savings. Pass-through pricing, full rebate credits, and audit rights let an employer compare net costs and recover overpayments. Employers that skip those demands are pricing their plan blind.
Ask your broker for a pass-through PBM contract. Then see what a WellthCare Plan would look like for your team.
This article is general information only and is not legal, tax, or medical advice. Employers should consult their own advisors.