PBM Drug Savings: How Much Can You Really Save?

Let's be honestprescription drugs are eating up our paychecks. I was recently talking to a friend who told me she pays more for her medication than her rent. That hit me hard. How is that even possible? And yet, it's becoming more and more common.

But here's something you might not know: there's a whole invisible system working behind the scenes that's supposed to protect us from these sky-high costs. It's run by companies called pharmacy benefit managers, or PBMs for short. You've probably never met one, but they've made decisions about which drugs your insurance coversand how much you pay for them.

So do PBMs actually help us save money? Or are they just another layer in a broken system?

The truth is it's complicated. But I'll say this: PBM drug savings are real. They're not some myth or marketing gimmick. In fact, studies show PBMs help save the healthcare system over $150 billion a year. That's not small change.

The problem? Not all of those savings make it to you. Some PBMs keep the profits for themselvesburied in backroom deals, hidden pricing, and contracts no one can understand.

So today, I want to pull back the curtain. Let's talk about what PBMs really do, how they save money (or don't), and most importantlyhow you can make sure you're getting the benefits.

What Are PBMs?

Imagine you're planning a massive family reunion dinner. You've got 200 relatives showing up, and you need to order 20 turkeys. You call the grocery store and say, "Hey, if I buy 20 at once, can I get a deal?"

That's kind of what PBMs dobut with insulin, heart meds, and cancer treatments. They're the behind-the-scenes negotiators between drugmakers, pharmacies, insurance plans, and you.

They decide which drugs go on your insurance plan's "approved list" (called a formulary), how much your pharmacist gets paid, and ultimately, what you pay at the counter. They're supposed to be our bulk shoppers, driving down prices by leveraging their massive scale.

But here's the catch: PBMs don't always pass those savings on. Sometimes they pocket part of the discount, or steer you toward a more expensive drug that gives them a better rebate. It feels a little backwards, doesn't it?

How Savings Work

So how do PBMs actually lower drug prices? Let's break it down.

Negotiating Manufacturer Rebates

One of the biggest ways PBMs save money is by demanding rebates from drug companies. Rebates are like discounts that happen after the salemoney kicked back to the PBM because they chose that drug for their formulary.

For example, say a PBM negotiates with the maker of Ozempic. "We'll put your drug on our preferred list, but only if you give us a 40% rebate." The drug company agrees, so millions of patients get access to itand the PBM gets a chunk of money back.

Here's the good news: according to the Pharmaceutical Care Management Association (PCMA), major PBMs like CVS Caremark and Express Scripts say they pass through 95% to 98% of rebates to insurers and employers. That means most of the savings do eventually flow back to keep premiums lower.

Still, you've gotta ask: If rebates are so great, why do list prices keep going up? That's where it gets messy.

Pushing Generics and Biosimilars

If you've ever switched from a brand-name drug to a generic and saw your copay drop from $50 to $5, you've felt this win firsthand.

Generics are chemical twins of brand-name drugs but often cost 80% less. PBMs help drive that switch by putting generics in the lowest cost tier on your formulary. Some even use automatic substitutionif a generic is available, your pharmacist switches you without asking (unless your doctor says no).

And now, we're seeing the same thing happen with biosimilarsnear-identical versions of complex biologic drugs like Humira or Stelara. These used to cost tens of thousands of dollars a year. Now, biosimilars are cutting those costs in half.

One health plan partner, SmithRx, saved $14.5 million just by helping patients transition from brand-name Stelara to a biosimilar. That's real moneymoney that could go toward better care, lower premiums, or even just peace of mind.

Controlling Costs with Formularies

Your insurance plan's formulary is like a menubut instead of appetizers and entrees, it's organized by drug tiers. PBMs design these tiers to guide your choices and control costs.

Tier	Example	Your Cost
1	Generic (e.g., metformin)	$5$10
2	Preferred brand (e.g., lisinopril)	$30
3	Non-preferred brand (e.g., brand insulin)	$60+
Specialty	Biologics, cancer drugs	2550% coinsurance

It sounds fair, right? The lower the tier, the less you pay. But here's the sneaky part: sometimes a PBM will leave a cheaper drug off the formulary just because it doesn't offer a big enough rebate. So even if Drug A is less expensive than Drug B, you might be stuck with the pricier onebecause it pays the PBM more.

Rules That (Sometimes) Help

You've probably heard of "prior authorization" or "step therapy"that infuriating process where your doctor has to jump through hoops before your insurance covers a drug.

But honestly? These rules aren't always the villain. Sometimes, they prevent unnecessary spending. Would you prescribe a $10,000 drug when a $10 pill works just as well?

Still, I've heard stories that break my heart. Like the woman with rheumatoid arthritis who had to fail on three cheaper medications before her insurer would cover the one that actually worked. That's not cost controlthat's cruelty.

Data-Driven Savings

Here's a cool thing: PBMs analyze mountains of claims data to find waste. They can flag cases where someone's still paying for brand-name Lipitor when a $0 generic exists. Or they'll notice a patient hasn't picked up their blood pressure meds in monthsand send a reminder.

Some modern PBMs even offer tools so employers and patients can see where money is being wasted. Want to know if your company is overspending on inhalers or insulin pens? Ask for a drug spend analysis report. It's like a financial checkup for your pharmacy benefits.

When PBMs Raise Costs

I didn't want to write this section, but I had to. Because to be truly helpfuland to pass the "would I tell my best friend this?" testI needed to show the full picture.

PBMs aren't saints. Some business practices actually increase drug costs for employers, taxpayers, and patients.

The Hidden Tax: Spread Pricing

Let me tell you about "spread pricing." It's one of those things that sounds harmless but is actually kind of wild.

Here's how it works: Your insurance plan pays the PBM $100 for a drug. The PBM then pays the pharmacy $70. The $30 difference? The PBM keeps it. No questions asked.

And guess what? This happens most with generic drugsthe ones that should be dirt cheap. The FTC found that the top three PBMs made over $1.4 billion this way on just 51 generic drugs. That's not savingsthat's a hidden tax on employers and taxpayers.

Rebates That Backfire

Now, back to rebates. They can lower net pricesaccording to a University of Chicago economist, net prices for rebated drugs actually fell 13% between 2017 and 2021. Meanwhile, non-rebated drugs went up 6%.

But here's the catch: because PBMs profit from rebates, drugmakers know they can raise the list priceas long as they give a bigger rebate. It's a vicious cycle: higher list prices bigger rebates PBMs earn more drugmakers raise prices again.

So who loses? Patients with high deductibles. Because they pay based on the inflated list pricebefore the rebate kicks in.

Pharmacy Deserts and Conflicts of Interest

Some of the biggest PBMs also own pharmacies (like CVS), mail-order services, and even health plans. That creates a massive conflict of interest.

They canand often dosteer patients toward their own pharmacies, while underpaying or excluding independent ones. In rural or low-income areas, this has led to "pharmacy deserts"places where there's simply no place to fill your prescription.

The FTC also found that PBM-owned pharmacies kept an extra $1.6 billion on two cancer drugs between 2021 and 2023. That's not just profitit's a broken system.

Can We Fix This?

Okay, deep breath. This all sounds bleak, but here's the good news: we can fix it.

Pay PBMs Differently

The root of the problem? PBMs make more money when drug prices go up. So why not pay them a flat fee for servicelike you'd pay an accountant or a plumber?

A study from the USC Schaeffer Center found that delinking PBM pay from drug prices could save the U.S. healthcare system $37 billion a year. That's not a typo. Thirty-seven. Billion.

And it would change their incentives: instead of picking drugs with the biggest rebates, PBMs would have to find the lowest net-cost option. That's what we want.

Transparency and Reform

There are real efforts happening right now:

• Federal proposals to ban spread pricing or require full "pass-through" pricing.
• Bills that would force PBMs to disclose all rebates.
• States like Oklahoma and Georgia testing new models.

But it's not always simple. West Virginia tried removing PBMs from Medicaid altogetherand guess what happened? Costs went up 12.5%. Turns out, even a flawed system can be better than no system at all. So we need smart reform, not wholesale destruction.

Choosing a Better PBM

If you're an employer or part of a benefits team, you have power. You can choose a PBM that's transparent.

Ask questions like:

• "Do you use pass-through pricing?"
• "Can I see the spread on my claims?"
• "Do you own a pharmacy? A health plan?"
• "Can I access real-time data on drug spending?"

Modern, transparent PBMs like SmithRx and RxBenefit are already doing thisand reporting over $200 million in annual savings for their members.

What This Means for You

Whether you're a patient, a caregiver, or someone who makes benefits decisions at workthis affects you.

For Patients: Take Control

You don't have to just accept your copay. You can take charge.

Next time you're at the pharmacy:

• Ask, "Is there a generic or biosimilar?"
• Check which tier your drug is on.
• Use tools like GoodRx, especially if your plan has a high deductible.
• Look for PBMs that partner with apps that show real-time prices.

And here's a hopeful stat: thanks to PBM efforts, the average member now pays less than $9 for a 30-day supply of a generic drug. That's progress.

For Employers: Be a Hero

Look, if you run a businessbig or smallyou have a real chance to make a difference in your employees' lives.

Start by auditing your PBM contract every year. Look for hidden spreads, rebate retention clauses, and vertical integration red flags.

Then, consider switching to a transparent PBM. One study showed employers get a return of $10 for every $1 spent on effective PBM services. That's not just savingsthat's value.

And don't forget clinical programs. Helping employees stick to their meds reduces ER visits and keeps people healthier. It's good for people, and good for business.

PBM drug savings aren't a fairy tale. They're real, measurable, and impactful. Without PBMs, many of us would be paying even more for prescriptions than we already are.

Butand this is a big butnot all savings reach the people who need them most. When PBMs profit from inflated prices, hidden spreads, or steering you to their own pharmacies, the system breaks down.

The good news? Change is possible. With better incentives, more transparency, and smarter choices, we can build a system where PBM drug savings actually flow to patients and employers.

So don't just assume your PBM is working for you. Ask questions. Demand clarity. Be curious.

Because your healthand your walletdepend on it.

What's your experience been like with prescription costs? Have you ever switched to a generic and saved big? I'd love to hear your storybecause in the end, that's what this is about: real people, trying to get the care they need without going broke.

Disclaimer: This article is for informational purposes only and does not constitute medical advice. Always consult with a healthcare professional before starting any new treatment regimen.