Prescription benefits clarity is about more than transparency

It's time to be precise about what transparency does or doesn't resolve, and why real outcomes require going beyond transparency to true clarity: where a PBM discloses information beyond drug cost that plan sponsors can verify, understand and use to manage costs.

Illusions and misconceptions

The overuse and broad application of "transparency" has created illusions and misconceptions. It plays on assumptions and expectations without offering a standard definition.

While many PBMs advertise "transparent" or "cost plus" models, they offer insight into drug costs while still withholding the very data that would let plans see what's driving trend.

In practice, transparency can end up meaning a presentation of numbers and terms that looks detailed but still doesn't reveal what's really driving employer costs, creating an appearance of openness that protects the status quo instead of enabling real accountability.

Plans need to be able to connect dollars to decisions, with access to not only what was paid but why, to design a practical roadmap for how to manage costs effectively going forward.

A report from the National Alliance of Healthcare Purchaser Coalitions (National Alliance) found that the current pharmacy benefit model is misaligned with the interests of employers and members.

Practices such as rebate-driven formularies that favor high-priced drugs, spread pricing that hides true costs, and contract terms that restrict data access and auditing aren't necessarily resolved within new "transparent" models.

These make it harder for purchasers to see incentives, test performance and hold anyone accountable for results.

One example is the move by large PBMs to create private-label manufacturing partnerships for biosimilar equivalents of drugs like Humira and Stelara and then placing those products on formulary with no competitive alternatives.

Biosimilars are a great way to provide high-quality care at a lower cost, but major PBMs are requiring members to use the products exclusive to "co-manufacturers" owned in part by those same organizations.

Members may think they are getting a lower-cost treatment, but what the PBMs don't discuss is that plan sponsors are paying $1,500 for a drug that's only $500 on the open market.

Limiting choices while creating a new revenue stream is not transparent, and it won't lower costs over time.

PBM incentives: What purchasers need to know

The National Alliance report urges purchasers to look for full pass-through of all revenues, consistent contract definitions and fiduciary-level accountability to restore value and trust in pharmacy benefits.

These are important points that all health care purchasers should review in their contracts.

Some of the current challenges with PBM incentives include the following:

Spread pricing hides true costs.

In spread-based models, PBMs say they're managing your drug spend and delivering rebate savings.

In reality, a portion of their margin comes from the gap between what the PBM pays the pharmacy and what it bills the plan.

They might pay a pharmacy $80 for a medication, bill the plan $100 and keep the $20 difference.

That spread is invisible to plan managers, and it's often concentrated on the drugs that a company's employees rely on most, the life-changing medications they can't afford to lose.

This isn't just a small markup on a few claims; it's a business model that can work against the long-term interests of the plan and its members.

Rebate optics obscure net cost.

Evaluating pharmacy performance solely by chasing any-willing-provider-based discounts or rebate guarantees can be misleading.

High-list-price, high-rebate drugs can replace lower-cost alternatives, pushing up overall costs even as rebate totals increase.

Employers might see a big rebate check, but total drug spend continues to rise year after year.

The complexity of "cost plus" language.

"Cost plus" models may sound simple. Plans pay what the PBM pays, plus a fee.

But often the definitions are far from clear. For many employer-sponsored pharmacy benefits, "cost" is not always the same thing.

Even if a PBM moves away from traditional AWP-discount guarantees, ambiguity often remains.

Does "plus" refer to a flat fee or a percentage? Are there additional manufacturer or service fees?

What parts of the manufacturer value flow through, and what parts are retained somewhere else in the system?

Without clear contract terms and full disclosure, it can be difficult for plan sponsors to know which questions to ask or which definitions apply.

What purchasers must demand

Clarity goes beyond drug cost transparency by pairing visibility with action.

It empowers purchasers with tools needed to interpret data, test assumptions and make decisions.

Clarity lets benefit teams move from reacting to unexpected costs to understanding what's behind them and planning accordingly.

It gives plans a clearer view of operational and financial practices so they can adjust plan strategy in a way that supports both the organization and its members.

To achieve clarity, plan sponsors and benefit consultants can apply five simple tests to their PBM arrangements:

1. Know exactly how the PBM makes money.

Require disclosure of all revenue streams, including manufacturer payments, service fees and spread.

If compensation isn't fully documented, incentives may not align with the plan's interests. Without a complete picture of how the PBM is paid, it's impossible to know.

2. Lock down definitions in the contract.

Terms like "rebate," "discount," "specialty" and "MAC" should mean the same thing in every proposal, contract and report.

Ambiguity creates room for manipulation and makes true comparisons impossible. Fix the language before you sign.

3. Own the data, down to the claim.

Real-time access to claim-level data, including NDC-11 and MAC list details, is non-negotiable.

Without it, you can't validate pricing, identify trend drivers or run an independent audit. If a PBM restricts access, that's a red flag.

4. Put audit rights in writing

Contracts should guarantee the sponsor's right to review network terms and manufacturer agreements — not just summaries — and to choose an independent auditor.

If your PBM discourages audits, you have your answer about their definition of transparency.

5. Align incentives to reduce trend and drive costs lower.

Look for models that eliminate spread, pass through all manufacturer discounts and link clinical management to value rather than rebate size.

Clarity means knowing where every dollar goes and ensuring that every stakeholder's motivation points in the same direction — lower net cost.

Clarity supports fiduciary responsibility.

Health benefit leaders work within strict financial limits.

When pharmacy costs rise faster than revenue, something else has to give, either wages, benefits or workforce investments.

Strong financial governance helps prevent those trade-offs.

Under the Employee Retirement Income Security Act, or ERISA, plan sponsors have a fiduciary duty to manage health plan assets with the care of a "prudent expert." The Consolidated Appropriations Act raised that bar even higher, requiring employers to demonstrate oversight, not just intent.

That's impossible without verifiable data and transparent compensation structures.

The National Alliance advises employers to confirm PBM and consultant compensation, validate all fees, standardize contract terms and maintain broad audit rights.

These are basic guardrails for fiduciary compliance, yet they remain absent from many contracts.

In today's consolidated PBM market, going beyond transparency isn't optional; it's the only way to meet fiduciary standards and protect plan dollars.

Too many PBMs still resist that level of scrutiny.

In the National Alliance's August 2025 Pulse of the Purchaser survey, 42% of employers said a vendor partner refused to provide full data access.

One-third reported incomplete visibility into health data, and nearly one-quarter said they were barred from conducting full audits of their data files.

These aren't isolated cases; they're proof that "transparency" often stops where accountability begins.

In an era where almost all PBMs claim transparency, purchasers still struggle to get basic answers.

Until plan sponsors can see, verify and act on their own data, they're managing in the dark.

The takeaway

Transparency has become the industry baseline.

Clarity beyond drug cost is what separates real accountability from marketing slogans.

This creates true alignment among plan sponsors, consultants, PBMs, and members, ensuring the ability to verify, compare, and act on what's driving costs and address issues at the source.

When this happens, the result is the optimal, lowest net cost.

Purchasers who demand complete revenue disclosure, standardized definitions, claim-level data, independent audit rights, and incentives tied to the lowest net cost can control pharmacy spend proactively, rather than simply reacting to it.

If you can't answer two questions -- how your PBM makes money on your plan and what changed your per-member, per-month cost last quarter -- you don't yet have true clarity.

The good news is that you can build it into your next contract.

David Fields is the chief executive officer of Navitus, a pharmacy benefit manager.