Transparency: The Mechanism for Change

Why the Focus on Transparency?

For years, healthcare costs have risen time and time again, and stakeholders – patients, payors, law makers, drug manufacturers, pharmacy benefit managers (PBMs), and others – are finding it increasingly difficult to nail down how and why the trend continues as it has. Drug spend, in particular, has risen substantially and continues to rank as a top priority for both individuals and their health plan sponsors. The 2025 Pulse of the Purchaser survey conducted by the National Alliance of Healthcare Purchaser Coalitions found that among 324 U.S. employers, drug prices were the number one threat to affordability for healthcare.

In the healthcare industry, “transparency” has long been the buzz word of choice, but it’s more than a trendy concern. True transparency is the one and only thing that can provide fairness to the pharmacy benefit management industry and what many believe is a drug supply chain riddled with profit-motivated business decisions and widespread market consolidation by PBMs with large market share.

What’s There to See?

The stated intent of the PBM industry is to lower drug prices while delivering comprehensive pharmacy benefit functions like ongoing utilization management, claims processing, and pharmacy network management. PBMs negotiate with drug manufacturers for price concessions by leveraging the bargaining power stemming from the number of covered lives they represent. These concessions come in the form of rebates – the plan sponsor covers the list price of a drug at the pharmacy counter (minus any cost sharing members are responsible for), and later, receives rebate dollars to retroactively lower the price of filling that prescription.

While it sounds like a solid cost-reduction strategy for plan sponsors, the rebate system is also a significant source of revenue for non-transparent PBMs who may keep a slice of each price concession as profit. As details of the rebate system came to light, there came calls for reform that mandates “100% pass-through” of rebates from the PBM to the plan sponsor.

To get around these reforms, large PBMs began recategorizing elements of manufacturer price concessions to reduce the amount that would pass through to health plans and increase the PBMs earnings. Larger PBMs also stood up entities called group purchasing organizations (GPOs) to leverage their massive purchasing power and take on rebate negotiations. These GPOs then would pass along rebate dollars to the PBMs, but not before taking a slice for themselves. PBMs then can pass along all the rebate dollars they receive from GPOs to the plan sponsors and claim 100% pass-through. This complex structure obscures the true flow of money.

Transparency Means Data Access

PBMs often report rebate revenue to plan sponsors in aggregate, meaning they can disguise rebate dollars attributable to individual medications. A plan sponsor can expect their membership to fill any variety of prescriptions for drugs with varying amounts of associated rebates. Some of those drugs are high cost with large rebates, and therefore present a significant opportunity for PBM retention of those dollars. Many others, however, are low dollar generics not associated with rebates at all. Claim-level data enables plan sponsors to scrutinize where they are spending their money. Are their net costs on a brand drug post-rebate lower than a generic alternative without a rebate? Would an alternative brand drug with a lower acquisition cost be cheaper in the end despite a smaller rebate? To answer these questions and hold PBMs and their affiliated GPOs accountable, complete claim-level data transparency is essential.

What Transparency Yields

Transparency in pharmacy benefit management isn’t just about accountability – it delivers tangible advantages for employers, plan sponsors, and the broader healthcare ecosystem:

Better Formulary Decisions: With access to claim-level data and true cost information, employers can make informed choices about which drugs to include on their formulary. Decisions are based on net cost rather than rebate-driven, ensuring cost-effectiveness without compromising quality of care.
Improved Cost Predictability: Transparency enables employers to anticipate costs and rebates more accurately. This reduces financial uncertainty and supports better budgeting for pharmacy benefits.
Fair Treatment Across Pharmacies: When reimbursement practices are transparent, all pharmacies – including independents – are treated equitably. This helps maintain a diverse pharmacy network and supports local businesses.
Alignment of Incentives: Transparent pharmacy benefit models prioritize net cost savings over hidden revenue streams. This alignment ensures that PBMs act in the best interest of plan sponsors and members, rather than chasing rebate dollars.
Enhanced Trust and Accountability: Clear visibility into pricing, rebates, and fees helps foster trust between employers, PBMs, and other stakeholders. It creates a foundation for a sustainable partnership and long-term affordability.

Conclusion

Healthcare stakeholders are right to demand more transparency from PBMs, but transparency itself is not the end goal. Rather, it is the means by which the end goals – increased trust in and accountability by PBMs – are achieved. Those end goals being met translates into real-world benefits that keep plan sponsors, PBMs, pharmacies, and other stakeholders functioning in a sustainable manner.

As scrutiny of PBMs continues to intensify, plan sponsors increasingly recognize that understanding where every dollar goes is no longer optional. Models built on opaque revenue streams and misaligned incentives may deliver surface-level savings, but they do so at the expense of long-term affordability. A transparency pharmacy benefit model offers a different path forward – one defined by clarity and fairness rather than complexity and hidden margins.