The Three PBM Contracts You Probably Have (And Only Know About One)

You don't have one PBM contract. You have three: the admin agreement you signed, plus separate affiliated-pharmacy and offshore rebate-GPO relationships you never signed. The profit hides in the two you can't see, so a "PBM review" that reads only the first contract reviews the cheapest part of the deal.

How many PBM contracts do you actually have?

Three, not one. Ask most CFOs how many agreements govern their pharmacy benefit and the answer is the admin contract they signed. That's the one they read. That's the one their broker benchmarked.

But the modern PBM isn't one company. It's a stack of affiliated businesses, each with its own agreement. The profit hides in the layers you never see.

Miss them, and your review only covers the base fees. The affiliated pharmacies and the rebate GPO stay invisible.

Where do the Big Three PBMs really make money?

In the pharmacies they own, not the admin fees you negotiate. Three PBMs process roughly 80% of the 6.6 billion prescriptions filled in the US. Caremark, owned by CVS Health. Express Scripts, owned by Cigna. OptumRx, owned by UnitedHealth.

Each is tied to a major insurer. Each also owns its own mail-order and specialty pharmacies. That's the game, vertical integration.

The FTC found the largest PBMs steer scripts to those affiliates. Their affiliated pharmacies pulled in 68% of specialty drug revenue in 2023, up from 54% in 2016. Your expensive specialty scripts route to a pharmacy the PBM owns.

That relationship isn't in your admin contract. It's a separate affiliate. Does your PBM pay its own pharmacy more than an independent one? The FTC says these companies have "the ability and incentive" to do exactly that.

What is an offshore rebate GPO, and why should you care?

It's a separate company your PBM created to negotiate and keep rebate dollars, and two of them sit overseas. This is the layer almost no employer sees. Each of the big three moved its rebate negotiating into its own group purchasing organization.

CVS created Zinc. Cigna created Ascent, headquartered in Switzerland. Optum created Emisar, based in Ireland.

The FTC flagged these entities as built to keep fees that never flow back to plan clients. Congress opened its own probe into the foreign-headquartered GPOs for the same reason. Your rebate dollars pass through a company you never contracted with, in a country you don't operate in.

Why does a single contract review miss the spread?

Because the margin moves between affiliates the review never touches. When the dispensing pharmacy, the specialty pharmacy, and the rebate negotiator are all owned by the same parent, the PBM can shift profit between them. That's how spread pricing survives a "pass-through" contract.

The numbers aren't small. The FTC's second staff report found the big three marked up specialty generic drugs by more than $7.3 billion over acquisition cost between 2017 and 2022. One drug ran 7,736% above cost.

Reviewing only your admin fees and rebate guarantee never touches that. The spread lives in the affiliate layer, not the contract you signed.

This isn't theoretical. In September 2024 the FTC sued all three PBMs and their rebate GPOs over insulin pricing, after list prices for drugs like Humalog climbed more than 1,200% since the late 1990s. The affiliates got named right next to the PBMs. They run as one machine.

What should you demand before you renew?

Get the whole structure on the table, not just the contract you signed. Before you renew your PBM deal, ask three questions.

Which affiliated pharmacies fill our specialty and mail-order claims, and how are they paid? What entity negotiates our rebates, and where does it keep the fees? Will you show us true acquisition cost, not just our discount off list?

If the answers come back vague, that's your answer. You aren't being sold one contract. You're being sold a system built so the important parts stay off your desk.

Frequently asked questions

What is a rebate GPO?

A rebate group purchasing organization is a separate company a PBM uses to negotiate drug rebates and administrative fees with manufacturers. Each of the big three set one up: CVS has Zinc, Cigna has Ascent, and Optum has Emisar. The FTC says these entities can keep fees that never reach the employer plan. For a deeper look at how that margin hides, see our piece on GPO rebates and the hidden margin in your drug costs.

Which pharmacies fill my specialty scripts?

Usually a pharmacy the PBM owns. The FTC found affiliated pharmacies collected 68% of specialty drug revenue in 2023, up from 54% in 2016. Your specialty and mail-order claims often route to those affiliates automatically, under a relationship that isn't spelled out in your admin contract.

What is spread pricing, and how do affiliates hide it?

Spread pricing is the gap between what the plan pays the PBM and what the PBM pays the pharmacy, kept as margin. When the dispensing pharmacy, specialty pharmacy, and rebate negotiator are all owned by one parent, that margin can move between them. You can review a "pass-through" admin contract and still never see it. Our benefits glossary defines the term in plain terms.

What should I ask my PBM before renewal?

Ask which affiliated pharmacies fill your specialty and mail-order claims and how they're paid. Ask what entity negotiates your rebates and where it keeps the fees. Ask to see true acquisition cost, not just your discount off list price. Vague answers on any of the three tell you the structure is doing what it was built to do.