Distribution company recovers $680K in PBM rebates through contract renegotiation
Case study by Corry Hull, REBC®, CSFS®
$680K
Annual rebates recovered to plan
31%
Pharmacy trend reversed to flat
5
PBMs included in competitive RFP
100%
Rebate pass-through achieved
The Challenge
A 520-life distribution company had been with the same PBM for seven years. Their contract had no audit rights, a spread pricing model, and rebates flowing to the broker rather than the plan. Annual pharmacy spend had grown 31% over three years despite flat enrollment.
The Approach
We obtained a full PBM contract review and benchmarked pricing against transparent market alternatives. A competitive RFP was issued to five PBMs. The incumbent was retained but on a fully pass-through model with 100% rebate transparency, audit rights, and a performance guarantee. A specialty drug management protocol was added.
Note: This case study is a composite of multiple employer engagements. Identifying details have been changed. Savings figures reflect the difference between prior contract economics and renegotiated terms. Sources: PBM contract analysis; rebate reconciliation reports; specialty drug utilization data; broker compensation disclosure.
Methodology & Verification▾
Baseline
Prior PBM contract economics: spread pricing, rebates retained by broker, no audit rights.
Intervention
Renegotiated pass-through contract with full rebate transparency, audit rights, and specialty drug management.
Measurement period
First 12 months post-renegotiation.
Savings methodology
Rebate recovery = rebates paid to plan under new contract minus rebates paid to plan under prior contract. Spread elimination calculated from ingredient cost benchmarking.
What was excluded
PBM implementation fees and clinical program costs excluded from savings.
Employer size
520 benefit-eligible employees; ~440 enrolled in medical with pharmacy benefit.
Funding type
Self-funded medical with carved-out PBM contract.
Source / verification
Rebate amounts verified against PBM quarterly rebate reports and plan financial statements.