How your PBM gets paid.
A pharmacy benefit manager sits between your plan, the pharmacies and the drug makers. Depending on its contract, it can earn money in several ways, and some of them are hard to see:
- Spread pricing: charging your plan more for a prescription than it pays the pharmacy, and keeping the difference.
- Rebates: payments from drug makers that may be passed through to your plan, kept by the PBM, or split, depending on how the contract defines them.
- Fees: administrative and other fees, some of which are not on your invoice.
When the PBM is owned by your carrier, the same company sets the drug prices and sells you the plan. That is worth knowing before you renew.
What we check in the contract.
- Definitions: how “brand,” “generic” and “specialty” are defined. Pricing guarantees depend on them.
- Rebates: what counts as a rebate, and what share reaches your plan.
- Spread: whether the PBM may keep the difference between what your plan pays and what the pharmacy is paid.
- Audit rights: whether your plan can audit the PBM, how often, and with whose auditor.
- Data: whether your plan can get its own claims data, which federal law now protects through the gag clause ban.
- Specialty pharmacy: whether specialty prescriptions are steered to a pharmacy the PBM owns.
- Termination: how and when your plan can leave, and what it costs.
How we run a PBM RFP.
When a PBM needs to be replaced, it goes through Ethos Fiduciary Procurement:
- Requirements for your plan’s pharmacy benefit, agreed with your committee.
- A standardized questionnaire, covering 43 questions across 11 topic areas, from pricing and rebates to clinical programs, data and service.
- Contract terms, with 29 terms each bidder must accept, reject or modify.
- Weighted scoring, blending the questionnaire (60%) and the contract terms (40%).
- Finalists, negotiation and a redlined contract, then implementation and quarterly monitoring.
New PBM rules.
Federal law signed in February 2026 adds reporting, rebate pass-through and audit requirements for pharmacy benefit managers. They apply to PBM contracts for plan years beginning on or after August 3, 2028, which is January 1, 2029 for a calendar-year plan. Read what the law requires. A PBM contract signed now runs into those years, so Ethos reviews new contracts against the obligations that are coming, not just the ones in force today.
What changed for Kalos.
Kalos Services, an HVAC and construction company in Central Florida, came to Ethos on a fully insured plan. Its PBM was owned by its carrier. After moving to a fiduciary PBM, with manufacturer assistance programs and international sourcing where appropriate, Kalos’s pharmacy cost fell to $17 per member per month, a 70% decrease.
One employee’s specialty medication cost $7,100 every two weeks. After a clinical review confirmed it was medically necessary, the same medication was sourced through international mail order for $3,500 every two weeks.
Figures as published in the Kalos Services case study, with Kalos’s permission.
How it fits your fiduciary duty.
Paying only reasonable plan expenses is part of the duty of loyalty, and monitoring what vendors are paid is part of prudence. A documented PBM review is how your committee shows it did both. Read what the duty requires.