Matt dives into a specific healthcare topic to help those in the industry, and those outside of it, better understand the market drivers causing today’s healthcare challenges.

I've spent two decades in healthcare access. I've read the contracts. I've lived as the patient denied care. And I've watched an entire industry build its value proposition on numbers no one can verify.

The Pharmacy Benefit Manager industry claims it saves patients $1,154 per person annually—more than $333 billion in total system savings. They say their services deliver $145 billion in economic value.

These figures appear in legislative testimony. They shape policy debates. Employers reference them when negotiating contracts.

But here's what I learned early in my career as a sales representative: these numbers measure a hypothetical that doesn't exist.

The Biosimilar Lesson

The system revealed itself when biosimilars hit the market.

Biosimilars can best be thought of as the generic copies of a biologic medication. It took years for the first adalimumab biosimilar to launch in 2016 - Humira being the branded medication from AbbVie. Pharma companies held it up in court. When it finally arrived with discounts as high as 85%, I watched what happened next.

Manufacturers increased rebates on the branded drug to block the cheaper product. This is a legal kickback for formulary placement. PBMs chose the higher-priced drug because they received higher kickbacks for doing so.

Despite launching at steep discounts, adalimumab biosimilars gained only 3% market share through 2023. The vast majority of PBMs and payers preferred rebates over discounts.

Some PBMs didn't move to biosimilars until they created their own "manufacturing" arms to buy and white-label the products. Then they set their own pricing and preferred their own biosimilar over the branded generic.

This has never been about cost savings. It's always been about maximizing PBM revenue.

The entire savings claim relies on the spread between list price and negotiated price.

But nobody actually pays list price.

List price is a hypothetical anchor. The rebates are not passed on to patients. PBMs pocket them. They claim this is the price of doing business and insist they're still saving employers money compared to list price.

Everyone knows nobody pays list price. It's a price that doesn't matter.

Yet the $1,154 savings figure measures exactly that—the delta between a fictional number and actual cost. Without transparency into how money flows between PBMs, insurers, and pharmaceutical companies, you can make up whatever number you want.

Research from USC Schaeffer confirms the problem: a $1 increase in rebates associates with a $1.17 increase in list price. The mechanism promoted as generating savings simultaneously drives list price inflation.

I've read these contracts. The opacity doesn't happen by accident. Lawyers engineer it.

Here are the specific provisions that block visibility into how money moves:

Confidentiality and Nondisclosure Clauses

PBM agreements classify rebate terms, manufacturer payments, and performance guarantees as proprietary trade secrets. Contracts restrict employers from sharing data with consultants unless they sign separate NDAs.

Pharmacists cannot see reimbursement logic because the methodology sits behind proprietary formulas shielded by confidentiality language. Patients see nothing because the plan sponsor itself lacks the data.

Rebate Ownership and Offset Language

Contracts state that PBMs retain a portion of manufacturer rebates or apply them as "administrative fees." The definition of rebate often excludes price concessions labeled as data fees, market share incentives, or service fees.

That drafting choice alone hides millions. Employers think they receive 100 percent of rebates. The contract defines rebate narrowly enough to make that statement technically true while excluding large revenue streams.

Spread Pricing Authorization

Some contracts explicitly permit PBMs to reimburse pharmacies at one rate while charging plan sponsors a higher rate. The agreement may reference a maximum allowable cost list that the PBM controls and updates unilaterally.

No disclosure obligation requires the PBM to show the delta between what it paid the pharmacy and what it billed the employer. Pharmacists see underpayment. Employers see aggregated claim costs. No one sees the spread.

Audit Limitations

Many agreements include strict audit windows—often 12 months or less. They cap audit frequency, require advance notice, and limit scope to specific line items. Some contracts restrict access to manufacturer agreements altogether.

If you cannot review upstream contracts, you cannot trace the flow of funds. An audit right that excludes rebate contracts or affiliate entities gives the illusion of oversight without the substance.

Affiliated Entity Pass-Through Language

Large PBMs operate through related entities. Contracts allow revenue to flow through subsidiaries classified as group purchasing organizations or specialty pharmacies. The agreement often disclaims responsibility for transparency across affiliates.

That structure fragments the money trail. Employers contract with one entity. Revenue moves through three others.

Data Ownership Provisions

Contracts state that claims data and analytics tools remain PBM property. Employers receive reports but not raw data in usable formats. Without raw data, independent actuarial validation becomes difficult.

Data control equals narrative control.

The result? Employers negotiate in the dark. Pharmacists operate on take-it-or-leave-it terms. Patients see only their copay and assume the number reflects cost.

Money follows language. If the language protects opacity, opacity wins.

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For years I read contracts that authorized spread pricing, narrow rebate definitions, affiliate carve-outs, and restricted audit rights. On paper, the structure allowed margin extraction. I knew the design enabled it.

But the contracts rarely showed the scale. They showed the mechanism. Not the magnitude.

When the FTC published evidence in January 2025, the conversation shifted from theory to proof.