If Your PBM Offered You a New Deal Tomorrow, Would You Know Which One to Take?

Key Takeaway: Caremark must now offer plan sponsors a standard alternative to rebate guarantees and spread pricing, and the Department of Labor's finalized fee-disclosure rule gives qualifying self-funded employers more information to evaluate what they are being offered. In this article, Dr. Martty Martínez Fraticelli explains why neither change tells an employer which pricing model is right for their population, and lays out five questions to ask before choosing. Once the same economics are visible across every PBM in an evaluation, clinical protection becomes the differentiator that is left.

Soon, a self-insured employer using Caremark may open a renewal proposal and find two ways to buy a pharmacy benefit.

One will look familiar: a model built around rebate guarantees and spread pricing. The other is a standard, pass-through alternative Caremark must offer under its settlement with the Federal Trade Commission.

Both still involve rebates. The difference is whether you’re promised a number up front or paid what actually comes through.

Which one should they take?

For most of the past 20 years, employers could negotiate harder inside the model they had. They could ask for a larger guarantee, a better rebate split or more reporting. But they were rarely asked to choose between genuinely different economic structures.

Caremark's settlement gives its clients a new option. It doesn't require every PBM to offer the same product, but it creates a benchmark employers and brokers can use to ask: why isn't a comparable option on our PBM's menu?

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What the New DOL Disclosure Rule Gives Employers

Separately, the Department of Labor's finalized fee-disclosure rule gives qualifying self-funded employers more information to inspect the arrangements they have and the alternatives they're offered.

Beginning with plan years on or after July 1, 2027, covered PBM service providers will have to disclose direct and indirect compensation, manufacturer payments, rebate amounts, formulary-placement incentives and the difference between what the plan pays and what the pharmacy receives.

The DOL rule doesn't create a new pricing option. It makes the existing economics harder to hide.

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Why More Transparency Won't Tell You Which PBM Model to Choose

A larger rebate isn't automatically a better deal. A guarantee can be undercut by exclusions, network limitations or costs pushed outside the guarantee. Plans still need to evaluate true net cost per member per month.

Once those economics are visible across the PBMs you're evaluating, transparency stops being a differentiator. The economics still matter. They're simply no longer hidden.  

That’s what makes clinical protection the differentiator. The rule will show a plan everything about what it paid and nothing about what happened before the claim became spend. A biosimilar switch that still holds a year later doesn’t show up in a fee disclosure. Neither does the specialty prescription that went out through a different channel, at a different cost, because someone checked first. Those are the decisions that separate two plans with identical pricing and very different years, and all of them happen before the money moves. A PBM can either show you that layer or it can’t.

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Five Questions to Ask Before You Choose a PBM Pricing Model

The first four are about economics. You have to get those right before anything else matters. The fifth is about clinical protection for plans and patients. What the economics can’t see.

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1. Can you reprocess, not just reprice, our actual claims under both models?

The standard exercise is a reprice: run our claims through your rates, show us the spread. Ask for a reprocessing instead.

A reprice processes your claims exactly as your current processor did. It changes the price and leaves every other decision in place. That made sense when price was the main thing you couldn’t see. Once the rule puts everyone’s pricing on the table, the exercise tells you less and less.

A reprocessing applies your formulary and your point-of-sale edits to the same claims. A reprice tells you what you overpaid. A reprocessing tells you what shouldn’t have been paid at all.

In our own book, groups that came to us after this kind of analysis have seen savings in the 10% to 20% range beginning in year one. Ask any PBM you’re evaluating to produce one, and ask what the analysis can validate, what data it needs and what it can’t determine.

Then ask to see the full equation: ingredient cost, pharmacy reimbursement, administrative fees, manufacturer dollars, rebates, specialty fees and retained compensation.

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2. What exactly are you guaranteeing, and what happens if you miss it?

A guarantee isn’t just a promise. It’s an allocation of risk.

Consider a 5,000-life employer that reduces headcount by a thousand. The people who leave are usually the most junior, so the population left behind is older and costs more per member. Nothing about the pharmacy benefit changed, but net cost per member rises and the guarantee is missed. The same math runs in reverse. A group that adds several hundred younger employees can show an improvement nobody earned.

That’s why the guardrails matter as much as the number. Ask what triggers a reset: enrollment shifts past a set threshold, a meaningful change in average age, a new gene therapy, a significant shift in specialty utilization. Ask what’s carved out and what the plan receives if net cost per member misses the target. A good answer should be specific enough to put in the contract.

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3. Explain your rebate-credit language clearly and what it means for our plan.

A rebate-credit clause lets a PBM count other savings against its rebate obligation, so when a drug’s price falls or a lower-cost alternative takes share, that savings is credited toward what was guaranteed.

When insulin list prices were cut in 2024, the rebates attached to those products went with them. Guarantees written against the old prices no longer matched what the market could produce, and rebate credits became the industry’s way of reconciling the two. The logic isn’t unreasonable: a guarantee priced against a drug’s old cost doesn’t mean much once most of that cost comes out.

The problem is how the clause often gets written. Most versions say credit may be taken when lower-cost alternatives enter the market, which leaves a lot undefined.

So here’s what to look for. Which drugs trigger a credit, and what happens when one is added later. Whether the credit is calculated on the difference in drug cost or on the rebate actually lost, because those produce very different numbers. And whether credits expire, since a price drop from three years ago belongs in the baseline by now.

Then ask what the guarantee is worth with credits applied. That figure is the one to compare.

Our clients can audit us whenever they want, and I’d ask for the same from anyone you’re evaluating. A PBM that can show how every manufacturer dollar reached your account, and what was credited against it and why, gives up nothing by letting you look. Reluctance is its own answer.

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4. What's our drug mix doing separately from our rebate yield?

Rebate totals can rise because the drug mix is getting more expensive. The biggest rebates sit on the priciest drugs, so a growing rebate check can be a symptom rather than a win.

The reverse is also true, and it surprises people more.  

We’ve had groups arrive expecting higher rebates than they ended up with, and close the year below the prior year’s net cost. The rebate line moved one way and the decisions underneath it moved the other: what the formulary allowed, how specialty was routed, whether biosimilar conversions held.

Ask to see utilization, list cost, net cost and rebates as separate measures. If a clinically appropriate, lower-net-cost alternative isn’t on your formulary, ask what kept it off.

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5. What clinical review happens before a prescription is dispensed?

Prevention usually means keeping a healthy person healthy. Pharmacy’s version is different: making sure someone who already has a diagnosis is treated well enough to avoid whatever would’ve come next.

Who is looking for duplicate therapies, dangerous interactions, incorrect doses and unnecessary first fills? When something gets flagged, who works it, how fast, and what happened to the prescription afterward? A PBM running real clinical programs can answer that at the claim level. One that isn’t will answer in generalities.

Pricing models describe how money moves. They don’t describe what happens to the prescription. Ask this question last, but weigh it early.

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Don’t evaluate a PBM proposal alone.

Don't make this decision with only the PBM's help. The DOL rule will produce more data, not necessarily more clarity.

Work with an independent pharmacy benefit consultant who has no financial stake in the PBM selected or product recommended. A good one will challenge the assumptions, translate the numbers and tell you where a proposal is too good to be true.

The right product isn't the one with the biggest rebate or the cleanest-looking spreadsheet. It's the one that produces the lowest defensible total cost for your population, makes the risk clear and gives you a contract strong enough to hold the PBM to its promise.

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FQA

How should an employer evaluate a PBM pricing model?

Ask the PBM to reprocess, not just reprice, twelve months of your actual claims under each model, using the same population, benefit design and member cost share. Establish exactly what is being guaranteed and what happens if the guarantee is missed, how the rebate-credit language works, what your drug mix is doing separately from your rebate yield, and what clinical review happens before a claim pays. Evaluate on total net cost per member per month rather than on headline discounts or rebate size.

What does the DOL's PBM fee-disclosure rule require?

The Department of Labor finalized the Improving Transparency in Pharmacy Benefit Manager Fee Disclosure rule on October 29, 2026, under ERISA. It covers group health plans established or maintained by a single employer with at least 100 employees, and applies to plan years beginning on or after July 1, 2027. Fully insured plans are excluded. Covered PBM service providers must disclose direct and indirect compensation, payments from drug manufacturers, rebate amounts in aggregate and by drug, formulary-placement incentives, and the difference between what the plan pays for a drug and what the pharmacy is reimbursed. Plans also receive ongoing semiannual disclosures and the right to an annual audit.

What is the difference between repricing and reprocessing claims?

A reprice runs the same paid claims through different pricing terms and shows what those prescriptions would have cost. A reprocessing analysis applies formulary and point-of-sale rules to show which claims might have been flagged or handled differently. Reprocessing cannot recreate a prior authorization decision without the underlying clinical documentation, so a PBM should be explicit about what its analysis can validate and what it cannot.

What is a rebate-credit clause in a PBM contract?

A rebate-credit clause can allow a PBM to count other savings toward its rebate obligation. If a drug's price falls or a lower-cost alternative reduces spend, the PBM may apply that value as credit against a rebate guarantee. The provision is not inherently unfair, but a plan should be able to see that total net cost fell by at least as much as the rebate obligation did.

Does more pharmacy benefit transparency mean lower costs?

Not on its own. Disclosure shows what a plan is being charged and by whom. It does not establish whether a therapy was appropriate, whether a lower-net-cost alternative was available, or whether anything was caught before a claim paid. Those remain matters of clinical review and contract design.

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