Your insurer, your pharmacy benefits manager, and your pharmacy might all be owned by the same company.
And they're using that power to overcharge you.
Here are four schemes PBMs use to extract money from patients---and what you can do about it.
1. Prior Authorization Games
Prior authorization sounds reasonable. Your doctor needs approval before prescribing certain medications. This is supposed to prevent script-happy doctors from endangering patients with unproven or unnecessary medication.
In practice? It's a tool that can be used to steer you toward certain drugs that make the PBM more money---which may be expensive brand-name drugs with higher rebates, not cheaper generics.
When the same company owns your insurer, your PBM, and your pharmacy, they can design prior authorization requirements that push you toward higher-rebate drugs---or drugs filled at their own pharmacies.
Fight back: If you're denied, appeal. Many denials get overturned. Ask your doctor about alternative medications that might skip the authorization hassle.
2. Formulary Manipulation
The formulary is the list of drugs your insurance covers. PBMs decide what's on it.
CVS Caremark and other major PBMs have been accused of placing drugs based on rebates, not patient outcomes. Higher rebate? Better placement. Lower list price but smaller rebate? You pay more out of pocket. (Source: FTC Interim Report, 2024)
The system rewards high list prices, not low costs to you.
Fight back: Ask your doctor about generic alternatives. The PBM system often favors brand-name drugs for rebate reasons---even when generics work just as well.
3. Spread Pricing
Spread pricing is simple: the PBM charges your health plan one price, pays the pharmacy less, and pockets the difference.
How much? A 2018 Ohio audit found PBMs charged the state Medicaid program $224.8 million more than they paid pharmacies---in a single year. Ohio has since banned the practice. (Source: Ohio Auditor of State, 2018)
Taxpayer money. Straight to PBM profits.
Fight back: Support state legislation banning spread pricing. Several states have already acted. Contact your state legislators.
4. Mail-Order Mandates
Many insurance plans require you to fill maintenance medications through their mail-order pharmacy.
Want to use your local pharmacy instead? You might end up paying more---or the drug won't be covered at all.
This isn't about your convenience. It's about capturing more prescription volume for the PBM's own pharmacy.
Fight back: Ask about exceptions. If the preferred pharmacy is significantly inconvenient, you may qualify for a network exception. Always ask: "What's the cash price?" Sometimes paying out of pocket is cheaper than your insurance copay.
The Takeaway
PBMs are designed to profit when you have no choice but to pay more.
But you're not powerless. Appeal denials. Ask about generics. Compare cash prices. File complaints with your state insurance commissioner and the FTC and demand your legislators break up these healthcare monopolies.