Spread Pricing

Spread pricing is a PBM revenue model where the pharmacy benefit manager charges the plan sponsor one price for a drug and pays the dispensing pharmacy a lower price, keeping the difference. The plan is billed $80, the pharmacy is reimbursed $55, and the PBM pockets the $25 spread as revenue. Both sides of that transaction usually stay confidential under the contract.

Where this shows up in the data: I've seen self-funded employer audits where spread on generic drugs alone accounted for 10 to 20 percent of total pharmacy spend. A single common generic — say metformin — might carry a $0.15 acquisition cost, a $4 pharmacy reimbursement, and a $22 charge to the plan. Multiply across a workforce and the numbers get real fast. The traditional PBMs built spread into their business model over decades; it's not a scandal, it's the contract structure everyone signed. Pass-through PBMs like Navitus, Capital Rx, and SmithRx charge a flat per-claim admin fee instead and return the actual pharmacy cost to the plan, eliminating spread entirely.

The takeaway: if you're a self-funded employer, ask your PBM directly in writing whether the contract is pass-through or spread. If it's spread, request a market check or reprice against a transparent PBM at your next renewal — the savings are usually 15 to 25 percent of pharmacy spend.