Let’s start with an uncomfortable idea:
Your PBM contract probably isn’t doing what you think it is. In fact, it’s probably doing nothing at all.
Not because it was negotiated poorly. Not because your consultant missed something. Not even because the terms are weak. But because in PBM world, what’s written down and what actually happens are two very different things. And most employers never look close enough to notice the gap.
The Lie We Tell Ourselves
There’s a story the industry likes to tell:
If you negotiate a strong contract—with competitive discounts, clear guarantees, and defined terms—you’ve solved the problem.
You’ve “locked in savings.”
You’ve created accountability.
You’ve protected the plan.
It’s a clean, reassuring narrative. It’s also (often) wrong. Because PBM contracts don’t create savings. They create expectations and those expectations are only valuable if they’re enforced. A strong contract is just the beginning; extracting the value of the contract takes diligence.
Contracts Don’t Adjudicate Claims
Here’s the part most plan managers and benefits professionals misunderstand:
PBMs don’t operate on contracts. They operate on claims.
Every prescription is priced in real time. Discounts are applied (or not). Classifications are made. Costs are determined. Millions of times per year. Your contract doesn’t sit in that process making sure everything lines up. It’s not a control mechanism but rather a reference document.
And unless someone is actively comparing what should happen to what did happen, the contract is just… there.
“On Average, You’re Fine”
If you’ve ever reviewed a PBM’s performance report, you’ve seen the script:
– Average discount: achieved
– Rebate guarantees: achieved
– Overall guarantees: met
– Performance: within expectations (compared to some arbitrarily high benchmark)
Everything looks clean. Buttoned up. Defensible. But, averages are where accountability goes to die. Because averages hide everything that actually matters.
Death by a Thousand Micro-Variances
PBM leakage, historically, doesn’t show up as a headline. Instead, it happens quietly across claims (and then as of late, starts showing up as big headlines).
In one real-world case, a comparison between contract terms and actual claims revealed over $100,000 in avoidable spend in a single year. This may seem negligible, unless you are the small employer that it happened to and it doesn’t take into account the compounding problem from prior years.
The Myth of Alignment
There’s another assumption baked into PBM relationships:
That incentives are aligned.
But PBM economics are complex, and small deviations don’t just happen—they persist. The real problem is that most employers are looking in the wrong place. They focus on (or trust their consultant to) negotiating better terms instead of verifying execution. Three questions that matter are:
Who does my PBM work for (plan, wall-street, other?)
Are my contract terms being delivered at the claim level?
What are my all-in pharmacy costs Per Member Per Month? Not what is the contract “saving” me; but what am I actually spending?
Claim-Level Enforcement – The Bottom Line
Not better contracts; enforced contracts; every claim tested, variance identified and dollar quantified.
A PBM contract doesn’t save you money; enforcing it does; and that enforcement happens at the claim level.