The Drug Pricing Paradox
The US drug pricing system is built on a paradox: drug prices are simultaneously very high (list prices) and very low (net prices after rebates). A drug with a $10,000 monthly list price may have a net price of $4,000 after manufacturer rebates — but the employer's plan pays based on the list price, and the PBM retains a portion of the rebate. The employer pays more than the net price; the PBM profits from the spread.
List vs. Net Price Example
| Drug | List Price (WAC) | Rebate | Net Price | Employer Pays | PBM Retains |
|---|---|---|---|---|---|
| Humira (adalimumab) | $6,000/month | $3,600 (60%) | $2,400 | $6,000 - member copay | Portion of $3,600 |
| Eliquis (apixaban) | $600/month | $240 (40%) | $360 | $600 - member copay | Portion of $240 |
| Keytruda (pembrolizumab) | $15,000/month | $6,000 (40%) | $9,000 | $15,000 - member copay | Portion of $6,000 |
The Employer's Problem
IQ Insight
The employer's problem is that they pay based on list price while the PBM profits from the spread between list and net price. A transparent PBM contract passes 100% of rebates to the employer — eliminating the spread. An opaque PBM contract allows the PBM to retain a portion of rebates — creating a conflict of interest between the PBM's financial interest and the employer's interest in lower drug costs.