Introduction

Pharmacy benefits often look straightforward on paper — but beneath the surface, hidden costs drive budgets higher year after year. Employers may not realize how spread pricing, misaligned incentives, and limited transparency quietly erode their bottom line. Understanding these hidden costs is the first step to fixing them.

Where Hidden Costs Come From

1. Spread Pricing
   PBMs charge employers more for a drug than they reimburse the pharmacy, pocketing the difference.

2. Opaque Rebates
   Rebates from drug manufacturers are often retained by the PBM instead of being passed through to employers.

3. Formulary Misalignment
   Some formularies favor higher-cost drugs because they yield bigger rebates — not because they’re better for patients.

The Impact on Employers and Members

• Employers: Rising drug spend with little visibility into what’s driving it.

• Members: Higher copays, confusion over coverage, and reduced trust in benefits.

Over time, these hidden costs translate into frustrated employees, higher turnover, and increased overall healthcare spend.

How to Fix It

Transparency-first PBMs tackle hidden costs by:

• Passing all rebates directly to employers.

• Offering real-time claims data for visibility.

• Aligning incentives around outcomes instead of profit margins.

Case Example

An employer with 800 covered lives uncovered over $400,000 in unnecessary costs hidden in spread pricing and retained rebates. Switching to a transparent PBM model not only saved money but also improved member satisfaction scores by 20%.

Conclusion

Hidden costs don’t have to be the status quo. Employers that demand transparency, accountability, and aligned incentives can reduce spend while delivering better benefits for members.