Drug Pricing Is Easy to Defend. Performance Is Not.

Key Takeaway: Drug pricing benchmarks, discounts and rebates do not show whether a pharmacy benefit is actually performing. Employers and brokers should evaluate what the benefit prevents, including avoidable risk, unnecessary therapy and downstream medical costs, alongside what it pays for drugs.

There’s a shift happening in how the value of pharmacy benefits is defined, and it’s raising the stakes for everyone involved.

Employers are paying closer attention. Advisors are fielding tougher questions. And pharmacy is increasingly influencing how decisions get made, not just in terms of cost, but in terms of impact. The question is no longer, “What does this drug cost?” It’s now, “What will this decision actually do to our plan?”

That shift may sound subtle, but it isn’t. Because the moment the question changes, the way performance is judged has to change with it.

Why Drug Pricing Is So Difficult to Compare

In most conversations, the evaluation still starts with pricing. The answer might reference a percentage of Average Wholesale Price (AWP), a comparison to National Average Drug Acquisition Cost (NADAC), or a rebate tied to Wholesale Acquisition Cost (WAC)—sometimes all three.

Each number comes with its own logic. Each can be defended. And that’s part of the problem. These benchmarks weren’t built to tell one consistent story. They were created at different times, for different purposes, by different parts of the system. Today, they sit on top of one another, shaping how drugs are priced, reimbursed, and evaluated.

The result is a system where the same drug can appear to have multiple “correct” prices at the same time. And when everything can be justified, it becomes difficult to know what to trust.

Early reference points like AWP and WAC were never intended to reflect what a drug truly costs. They provided consistency, not accuracy. As their limitations became more visible, new approaches were introduced to address specific gaps.

Average Sales Price (ASP) began shaping Medicare reimbursement. Measures like Average Manufacturer Price (AMP) and NADAC aimed to better approximate acquisition cost. Maximum Allowable Cost (MAC) pricing emerged to manage generics, where multiple manufacturers produce clinically similar drugs at very different prices. State and federal policies added additional layers.

So instead of one clear framework, multiple pricing systems now operate at once, each influencing how a drug is evaluated depending on where you look. That’s why two stakeholders can review the same drug and arrive at very different, fully defensible conclusions about its cost. The system doesn’t just allow for that complexity. It produces it.

Why Comparing Drug Prices Doesn’t Show True Value

No single part of the system is responsible for how drug pricing works today. Manufacturers set key price inputs. Pharmacies acquire and dispense drugs under different cost structures. Government programs introduce their own reimbursement frameworks.

When the numbers don’t line up, the conversation often shifts toward accountability. And in pharmacy, that accountability is often directed at PBMs. In many cases, that scrutiny is fair. There are parts of the industry that have contributed to price confusion, and areas where better alignment and transparency are still needed.

But focusing only on price, or who is responsible for it, misses the more important question: Does drug pricing, at its core, really improve performance for the plan? Because a drug can appear cost-effective within the structure of the system and still lead to higher overall spend for the plan.

What Drives Pharmacy Costs Beyond Drug Prices

The most meaningful cost decisions aren’t just financial. They’re clinical.

They show up in:

• The appropriateness of the medication for that patient at that moment
• The dose, duration, or combination and the risks those introduce
• Whether a more effective or lower-cost alternative was available
• Whether an interaction, duplication, or escalation could have been identified earlier

These are the points where long-term cost is often shaped. The impact shows up later, in additional prescriptions to change or correct therapy, adverse events or complications, and increased utilization across the system. So, a plan may appear to be performing well against discounts, guarantees, or rebate targets, while underlying clinical gaps continue to drive avoidable spend.

How to Evaluate PBM Performance and Pharmacy Benefit Value

A pharmacy benefit is often evaluated after the fact, through reports, reconciliations, and pricing summaries that attempt to explain what already happened. But those numbers are only a reflection.

What actually protects the plan, and the member, are the clinical decisions and safeguards built around each therapy.

At the moment a prescription is written, a claim is reviewed, or a therapy is allowed to move forward, those protections determine whether risk is addressed, or allowed through.

Those decisions shape whether a therapy works as intended or introduces new risk. They determine whether costs stabilize or continue to rise. They define whether a plan is reacting to performance, or actively influencing it. And that’s where the conversation is starting to change.

Because in a system where nearly every price can be justified, the number itself stops being the signal. It becomes the outcome of a series of decisions most plans never fully see.

What matters is what was prevented: risk, avoidable complications, and therapies that would not have served the patient or the plan That kind of avoided harm and cost is harder to measure. It doesn’t show up cleanly in a report or a benchmark comparison. But it’s often the difference between a pharmacy benefit that looks good on paper, and one that actually performs.

For employers and their broker partners, that distinction is becoming harder to ignore.

Not because pricing no longer matters, but because it can no longer stand on its own. In a category where pharmacy can drive a significant share of total healthcare spend, the question is no longer just what a drug costs. It’s whether the decisions behind it are protecting the plan, or quietly putting it at risk.

FAQs

Why are PBM drug prices difficult to compare?

PBM drug pricing may be measured against several benchmarks, including AWP, WAC, NADAC and MAC. Because those benchmarks were developed for different purposes, the same drug can appear to have several defensible prices at once.

How should employers measure PBM performance beyond discounts and rebates?

Employers should evaluate how the benefit manages clinical appropriateness, medication safety, avoidable utilization and the decisions that influence total cost over time.

Do PBM discounts and rebates prove a pharmacy benefit is performing well?

No. Discounts and rebates show part of the financial picture, but they do not show whether the benefit prevented unnecessary therapy, avoidable complications or downstream medical costs.