How does spread pricing work at the pharmacy counter?
Spread pricing is the gap between two prices for the same prescription: what your plan pays the pharmacy benefit manager (PBM), and what the PBM pays the pharmacy. Under a spread contract, the PBM keeps that gap as income.
The plan does not see it because the invoice shows only one side of the transaction. You see what you were billed. You do not see what the pharmacy was paid.
Here is how one claim can look. The numbers are illustrative, not drawn from any real contract or plan.
| Step | Illustrative amount |
|---|---|
| Plan is billed by the PBM for a 30-day generic prescription | $40.00 |
| PBM pays the pharmacy for the same prescription | $12.00 |
| Spread kept by the PBM | $28.00 |
| Spread on 1,000 fills of that drug in a year | $28,000 |
Neither number is wrong under the contract. The plan paid the price the contract set, and the pharmacy got the price its own network agreement set. The PBM sits between two contracts, and the spread lives in the space between them. It is also separate from manufacturer rebates, so a PBM can earn a spread on a generic drug that has no rebate at all.
Generic drugs, including specialty generics, are a good first place to look, because their list prices are loosely tied to what pharmacies actually pay. The FTC’s 2025 report on specialty generics, covered below, estimated the spread on those drugs alone at about $1.4 billion.
How do you spot spread pricing in your PBM contract?
You spot it in how your contract defines what the plan pays. If the plan pays a negotiated price rather than the actual amount paid to the pharmacy, the contract allows a spread, whether or not the word “spread” appears anywhere in it.
| Contract term | Pass-through model | Spread model |
|---|---|---|
| What the plan pays per claim | The amount the PBM actually paid the pharmacy, plus a disclosed dispensing fee | A contracted price, often a discount off average wholesale price (AWP) or a MAC price |
| How the PBM is paid | Disclosed administrative fees, per claim or per member | Fees plus whatever it keeps between the plan price and the pharmacy price |
| What you can audit | Claim-level pharmacy reimbursement | Usually only whether the contracted price was met |
Four things to look for when you read the contract:
- The pricing definition. Look for language like “the lesser of” AWP minus a discount, the MAC price, or the pharmacy’s usual and customary price. Then check whether that same formula is used for what the pharmacy is paid. If the contract says the PBM may use a different price list for pharmacies, a spread is possible.
- MAC lists. A maximum allowable cost (MAC) list sets the most the PBM will pay for a generic drug. Some PBMs keep one MAC list for billing plans and another, lower one for paying pharmacies. Ask whether there is one list or more than one, and whether your plan can see the list used to bill it.
- Guarantees measured in aggregate. Many contracts promise a discount, such as “AWP minus 80% on generics,” measured across all generic claims for the year. An aggregate guarantee can be met on paper while individual drugs are billed well above what pharmacies were paid, because large discounts on a few cheap, high-volume drugs offset small discounts on expensive ones. Ask how each guarantee is measured, whether it is reconciled by drug or in total, and how definitions of “brand,” “generic” and “specialty” move claims between buckets.
- The word “transparent.” A contract can describe itself as transparent or pass-through and still allow spread on certain channels, such as mail order or specialty pharmacy. Read the pricing section for every channel, not the cover page.
If you cannot tell from the contract, ask the PBM in writing: “Do you pay pharmacies the same amount you bill our plan for every claim, in every channel?” A clear yes, backed by an audit right, is the answer you want.
What does the 2026 federal law change for spread pricing?
The Consolidated Appropriations Act, 2026 (Public Law 119-75, signed February 3, 2026) does not ban spread pricing in employer plans. It makes the spread visible and moves rebate money back to the plan. Most of its PBM rules apply to plan years beginning on or after August 3, 2028, which for calendar-year plans means January 1, 2029, and they attach to contracts entered into, renewed or extended on or after that date.
| Provision | What it requires | Who it applies to |
|---|---|---|
| Claim-level spread reporting | For each drug, the amount the plan paid the PBM, the amount paid to the pharmacy, and the difference for each claim, in reports at least every 6 months (quarterly on request) | Group health plans of employers averaging 100 or more employees (or plans with 100 or more participants), and insured coverage that opts in |
| Summary reporting | A plan-level summary, plus a summary the plan can give participants on request | All group health plans |
| Contract terms | Plans and insurers may not sign, renew or extend PBM contracts that limit the disclosures the reports need | All group health plans |
| Rebate pass-through | 100% of rebates, fees, alternative discounts and other remuneration from manufacturers, wholesalers, rebate aggregators and related parties, tied to the plan’s drug use, must be remitted to the plan quarterly, within 90 days after each quarter | ERISA plans (a condition of the contract being “reasonable” under ERISA section 408(b)(2)) |
| Audit rights | Rebate records and rebate contracts available for audit at least once per plan year, by an auditor the plan fiduciary selects and the PBM does not pay for | ERISA plans |
| Penalties | $10,000 per day for failing to report required information, and up to $100,000 per item of knowingly false information | PBMs, insurers and others subject to the reporting rules |
Two points are easy to miss:
- Rebate pass-through is not a spread ban. The pass-through rule covers money from manufacturers and others in the supply chain. A spread is money the PBM keeps from the plan’s own payment. What the law does to spread is require it to be reported claim by claim, so the plan can see it and decide whether it is reasonable.
- “Delinking” applies to Medicare, not employer plans. The same law limits PBMs serving Medicare Part D plans to bona fide service fees, starting in 2028. That rule does not apply to employer group health plans.
The law also broadens the list of services covered by ERISA’s service provider fee disclosure rule, section 408(b)(2), to name pharmacy benefit management services expressly.
The DOL’s proposed disclosure rule
Separately, the Department of Labor proposed a PBM fee disclosure rule on January 30, 2026. It would require PBMs serving self-funded ERISA plans to estimate their direct and indirect compensation, including spread compensation and pharmacy clawbacks, before a contract is signed, renewed or extended, then report actual amounts twice a year, and to let plan fiduciaries audit those disclosures. The comment period was extended to April 15, 2026, so the Department could account for the new law. It is a proposal, not a final rule, so check its status before treating any of its dates as binding.
What did the FTC find about PBM pricing?
The Federal Trade Commission found that the three largest PBMs handle most U.S. prescriptions and earned billions above cost on specialty generic drugs, including through spread pricing. Those findings come from two interim staff reports in its study of the largest PBMs. Both are useful background when your committee asks whether spread pricing is a real cost or a theory.
| Report | Date | Key findings |
|---|---|---|
| First interim staff report | July 9, 2024 | The three largest PBMs processed nearly 80% of the roughly 6.6 billion prescriptions dispensed in the U.S. in 2023, and their affiliated pharmacies held nearly 70% of specialty drug revenue. PBMs may steer patients toward their own pharmacies. |
| Second interim staff report, on specialty generic drugs | January 14, 2025 | The three largest PBMs (Caremark Rx, Express Scripts and OptumRx) marked up many specialty generic drugs at their affiliated pharmacies by hundreds or thousands of percent. Their affiliated pharmacies earned more than $7.3 billion above estimated acquisition cost on these drugs, and the PBMs earned an estimated $1.4 billion more through spread pricing. |
These are staff reports, not court findings, and they cover specific drugs and years. They show where to look, which is specialty generics and affiliated pharmacies, not what your own plan pays.
What can an employer ask for now?
An employer can ask for most of what the law will require in its next contract or renewal, without waiting for 2029.
- Pass-through pricing in writing. The plan pays what the pharmacy was paid, plus a disclosed dispensing fee, in every channel: retail, mail order and specialty.
- One MAC list. The same list for billing the plan and paying pharmacies, and the right to see it.
- Claim-level reporting. For each claim, the amount billed to the plan and the amount paid to the pharmacy. Under the new law this becomes a required report for plans of employers with 100 or more employees, so a PBM that refuses it today is telling you something.
- Guarantees reconciled by drug category, with clear definitions. Fixed definitions of brand, generic and specialty that the PBM cannot change midyear, and any shortfall paid back to the plan.
- A real audit right. At least once a year, with an auditor your plan chooses, access to claim and pharmacy reimbursement data, and no fee charged by the PBM for the audit.
- All rebates and manufacturer payments to the plan. Including administrative fees from manufacturers, with each type listed.
- Data you own. Your plan’s claims data, on request, in a usable format. The gag clause rules already protect a plan’s access to its own data.
PBM contracts often run several years, so a contract signed or renewed now may still be in force when the 2029 rules start. Building these terms in at renewal is easier than amending a contract later. For a full review of a PBM contract against these terms, see pharmacy and PBM. For how to compare PBMs side by side, see how to choose a PBM.
