Pass-Through vs. Traditional PBM
| Element | Traditional PBM | Pass-Through PBM |
|---|---|---|
| Rebates | PBM retains a portion | 100% passed to employer |
| Spread pricing | PBM earns spread; not disclosed | No spread; employer pays actual pharmacy cost |
| DIR fees | PBM retains DIR fees | DIR fees passed to employer or eliminated |
| Administrative fees | Lower (offset by other revenue) | Higher (only revenue source) |
| Transparency | Limited | Full |
| Net cost | Often higher (hidden fees) | Often lower (no hidden fees) |
Net Cost Comparison
The right metric for evaluating PBM models is net cost — total drug cost including all fees, minus all rebates and credits. A traditional PBM with lower administrative fees but significant rebate retention and spread pricing may cost more in total than a pass-through PBM with higher administrative fees but no hidden revenue. Always compare net cost, not just administrative fees.
Pass-Through Savings
IQ Insight
Employers who switch from traditional to pass-through PBMs typically save 10–20% on total pharmacy costs. The savings come from: (1) 100% rebate pass-through; (2) elimination of spread pricing; and (3) elimination of DIR fees. For a plan spending $2 million on pharmacy, a 15% savings is $300,000 annually — far exceeding the higher administrative fees of a pass-through PBM.