Renewal season arrives and the number is ugly. The explanation is vague: healthcare inflation, trend, the cost of doing business. Everybody nods. Nobody digs.
Dig anyway. A big and growing share of that increase isn’t medical spend. It’s pharmacy. And pharmacy is built to keep you from seeing what you actually pay.
This isn’t only a self-funded issue. Fully insured and level-funded plans carry the same drug costs, just buried deeper.
Where the money hides
Your Pharmacy Benefits Manager (PBM) sits between your plan, the pharmacy, and the drug maker, and gets paid by all three. Spread pricing means they charge your plan more than they pay the pharmacy and pocket the difference. Rebates from manufacturers are supposed to lower your costs, but often steer your plan toward pricier drugs because the rebate is bigger (great for everyone except you).
You’d never accept that from another vendor. Imagine a supplier who profited every time your costs rose, then refused to show you the invoice. You’d fire them by Friday.
What actually fixes it
Ask for pass-through pricing. You see exactly what the pharmacy was paid, you pay that, and the PBM charges one flat, disclosed fee. No spread. Rebates flow back to your plan.
That single change turns your biggest mystery cost into a number you can read.
So when this year’s increase lands, ask: how much of this is pharmacy, and who’s profiting on the part you can’t see?
