What is PBM pricing?
PBM pricing is the way a pharmacy benefit manager determines what your health plan pays for prescription drugs, and how the PBM earns revenue from managing the benefit.
At first glance it looks simple. A prescription is filled, the pharmacy gets paid, the plan gets billed. Three events, three numbers.
A good deal can happen between those numbers. The pharmacy may receive one amount while the plan is charged another. Revenue can reach the PBM through spread, administrative fees, retained rebates, or other contractual arrangements that never appear as a line on a standard report.
That is why a single discount percentage or rebate guarantee is not enough to evaluate a pharmacy benefit. One number describing an average cannot tell you what happened on a particular prescription.
How PBM pricing works
A single pharmacy claim generally involves several separate pieces:
- The amount paid to the pharmacy
- The dispensing fee
- The amount charged to the health plan
- Any member cost sharing
- Manufacturer rebates or other payments
- Administrative or program fees
- The PBM's own revenue
The relationship between those pieces is what determines the plan's actual pharmacy cost. If a pharmacy receives $80 for a prescription and the plan is charged $100, there is a $20 difference, and the contract should be able to explain it.
Common PBM pricing models
Different PBMs price prescription benefits differently, and the label in the contract matters less than what the arrangement produces.
Spread pricing. The amount charged to the plan can be higher than the amount paid to the pharmacy, and the PBM keeps the difference. The spread may not appear as its own line item on a standard report, which is what makes claim-level analysis necessary rather than optional.
Pass-through pricing. The pharmacy cost reaches the plan without a margin added between the pharmacy payment and the plan charge. The employer can then see the underlying cost and evaluate the administrative fee separately.
Cost-plus and fee-based models. Some arrangements combine pharmacy costs with additional administrative or program fees.
The useful question is not which of these labels appears in the agreement. It is what the employer ultimately pays across the whole arrangement, and whether the pieces can be identified well enough to add them up.
What the pharmacy was paid
Start with the pharmacy. For each prescription, what was the pharmacy actually paid for the drug, and what was the dispensing fee on top of it?
Without those two numbers, it is difficult to know whether a reported discount represents an actual reduction in cost. A percentage off a benchmark price is a claim about a benchmark, not about what your plan spent.
Kanurra shows the pharmacy acquisition cost and the dispensing fee separately on the claim.
What this tells you
Can you see what the pharmacy received, separately from the fee for dispensing it?
What the plan was charged
The next number matters just as much. What did your health plan actually pay for that same claim?
Compare the two amounts. If they are different, the contract should explain why. That comparison is the basic test for spread and for any other pricing difference sitting between the pharmacy and the plan.
What this tells you
Can you put the pharmacy payment and the plan charge side by side on one claim?
PBM spread pricing
Ask directly whether there is a spread between what the pharmacy receives and what the plan pays.
Do not rely only on a generic effective rate, an average discount, or an annual savings guarantee. A PBM can report strong aggregate performance while still earning spread revenue on individual prescriptions, because an average absorbs the claims that would show it.
The only way to see it is to compare the underlying numbers on a single fill.
What this tells you
Has anyone answered the spread question with a number rather than a reassurance?
PBM fees
Fees can appear in several places at once, and the headline administrative fee is rarely all of them. Review every charge named in the agreement, then work out which ones go to the PBM and which go to other entities in the pharmacy program.
- Administrative fee
- Dispensing fee
- Clinical program fees
- Data and reporting fees
- Network fees
- Any other charge named in the agreement
What this tells you
Can you name every fee the plan pays and say which entity receives each one?
Rebates and net cost
A rebate should not be evaluated on its own. Ask how much was generated, when it was received, how much was credited to the plan, and whether any portion was retained.
A large rebate can look attractive while the underlying drug price is higher than it needs to be. The number that decides the question is your net cost, after pricing, fees, and rebates are all accounted for.
Kanurra credits 100% of the manufacturer rebates it receives back to the plan.
What this tells you
Do you know your net pharmacy cost, rather than your rebate total?
Administrative revenue
Ask how your PBM actually makes money. Is it earning from spread? Retaining part of the rebates? Charging for programs or data? Or is there one clearly disclosed administrative fee and nothing else?
The answer changes the economics of the entire pharmacy benefit, because every undisclosed revenue source is a cost the plan is carrying without seeing.
Kanurra charges one flat per-employee-per-month administrative fee, disclosed in the contract, with no spread, no rebate cut, and no program or data fees.
What this tells you
Can your PBM state every way it earns money from your plan?
Specialty-drug pricing
Specialty prescriptions deserve separate attention. A small number of them can account for a large share of pharmacy spend, which means a pricing model that looks inexpensive across routine generics can look very different once specialty claims are included.
Look at the amount charged, the pharmacy filling the prescription, the acquisition cost where it is available, the dispensing fee, any rebates, and any specialty-related fees.
What this tells you
Do you know what your most expensive claims cost and why they were routed where they were?
Pricing data and auditability
The final question is whether you can prove any of it. Can you reach claim-level data? Can you see what the pharmacy received, identify the spread, reconcile the rebate credits, and account for every fee?
If you cannot answer those questions, you do not have auditable pricing. You have a report about pricing.
What this tells you
Could an independent reviewer reach the same numbers from the records you hold?
What auditable PBM pricing looks like
The easiest test is to take one claim and follow the money through it. Two kinds of reporting answer that test very differently.
What you usually get
Summary pricing
- Average discount percentages
- Aggregate rebate numbers
- Generic effective rates
- Overall pharmacy spend
- Guarantees that depend on defined calculations
What lets you check it
Auditable pricing
- Pharmacy acquisition cost at the claim level
- Dispensing fees identified separately
- Plan charge visible for each claim
- Spread identified, and $0 where it is $0
- Rebates shown as credited to the plan
- Fees disclosed separately
- Underlying claims data available for review
The first column can describe a benefit accurately without ever showing you the economics underneath it. The second lets you check the price instead of trusting the summary.
Questions to ask your PBM
The answers should be measurable in the claims and supported by the contract, not delivered as a characterization of the relationship.
- 01What did the pharmacy actually receive for each prescription?
- 02What did our plan pay for that same claim?
- 03Do you use spread pricing on any part of the pharmacy benefit?
- 04What fees are charged outside the stated administrative fee?
- 05Which manufacturer rebates are generated, and how much is credited back to the plan?
- 06Can we export claim-level data and independently verify the pricing?
Compare your current PBM pricing
You do not need to change your PBM to start asking better questions. Take a few claims from your current pharmacy report and set the pharmacy payment against the plan charge. Then look for spread or markup, rebates retained, administrative fees, program fees, and how specialty was priced.
Those differences will usually tell you more than an annual savings presentation does. Kanurra can run this analysis against your existing claims so you can see how your current arrangement compares before deciding anything.
If you want the longer version, our PBM audit checklist walks through contract terms, audit rights, claims testing, and rebate reconciliation step by step. For how rebate dollars specifically are tracked and credited, see PBM rebates.
PBM pricing FAQ
What is PBM pricing?
PBM pricing is how a pharmacy benefit manager determines what a health plan pays for prescription drugs and how the PBM earns revenue from the benefit. It covers the relationship between the pharmacy payment, the plan charge, rebates, dispensing fees, administrative fees, and any other contractual revenue.
What is PBM spread pricing?
Spread pricing is an arrangement where the PBM charges the health plan more than it pays the pharmacy and keeps the difference as revenue. The simplest way to identify it is to compare the pharmacy payment with the amount charged to the plan on the same claim.
What are PBM fees?
PBM fees are the charges associated with administering a pharmacy benefit. Depending on the contract they can include administrative fees, dispensing fees, data fees, clinical program fees, network fees, and other service charges. Review the complete fee structure rather than only the headline per-employee-per-month amount.
What is an auditable PBM pricing model?
An auditable pricing model lets the employer see the underlying pharmacy cost, the plan charge, the fees, the rebates, and the PBM's own revenue, and understand how the net cost was calculated from them. The test is whether the employer can reach the same figure independently.
Is pass-through pricing always cheaper?
Not automatically. It can make the underlying economics more visible, but the employer should still compare the total cost of the arrangement, including the pharmacy price, rebates, dispensing fees, and the administrative fee. Visibility and low cost are different things.
How should employers compare PBM pricing models?
Compare the complete economics rather than the label in the contract. Review the pharmacy payment, the plan charge, any spread or markup, rebate treatment, administrative fees, specialty pricing, network costs, and any additional program or data fees, then calculate the actual net cost to the plan.
Does Kanurra use spread pricing?
No. Kanurra's model has no spread or markup on claims: the drug passes through at the price Kanurra pays the pharmacy.
How much of the rebate does Kanurra keep?
None. 100% of the manufacturer rebates Kanurra receives are credited back to the plan.
Can I compare my current PBM pricing with Kanurra?
Yes. Kanurra can review your existing claims and compare the underlying pharmacy economics rather than asking you to compare high-level guarantees. The audit is designed to show what your current PBM is charging and where the differences come from.
See what your PBM pricing really looks like
Do not compare PBMs by the number on the first page of the proposal. Send us your claims and we will follow the money inside them, line by line.
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