Research Methodology
How We Research PBM Strategy
Pharmacy benefit management is one of the most opaque areas of employer health benefits. This page documents how we evaluate PBM contracts, source pricing data, define transparency criteria, and apply AI analysis — and where our methodology has limits.
01 — Editorial Standards
Independence from PBM commercial relationships
PBMs are among the most aggressive marketers in healthcare. Our editorial policy prohibits any commercial relationship that could influence coverage.
No PBM advertising
We do not accept advertising, sponsored content, or placement fees from PBMs, GPOs, or pharmacy networks. Coverage is based on employer relevance, not commercial relationships.
Rebate data sourcing
Rebate estimates are drawn from published academic research, CMS drug spending data, and employer-reported experience. We do not use PBM-provided rebate estimates without independent corroboration.
Spread pricing analysis
Spread pricing analysis is based on state Medicaid audit findings, academic studies, and employer-reported data. We cite sources for all spread pricing estimates.
Formulary independence
Formulary analysis is based on publicly available formulary documents and clinical literature. We do not accept PBM-provided formulary assessments as authoritative.
02 — Transparency Criteria
The 8 contract transparency terms every employer should demand
Our PBM contract analysis framework is built around eight transparency criteria that distinguish a genuinely transparent PBM contract from one that uses transparency language without substance.
Pass-through pricing
Employer pays the exact ingredient cost the PBM pays the pharmacy — no spread retained by the PBM.
100% rebate pass-through
All manufacturer rebates, administrative fees, and price protection payments flow to the plan, not the PBM.
Audit rights
Employer has the contractual right to audit PBM claims data, rebate calculations, and network pricing.
MAC list transparency
Maximum Allowable Cost lists are disclosed and updated on a defined schedule with an appeal process.
Spread pricing disclosure
Any difference between what the PBM pays the pharmacy and what it charges the plan is disclosed and quantified.
Formulary change notice
Employer receives advance notice of formulary changes with sufficient time to communicate to members.
Performance guarantees
Contractual guarantees on generic dispensing rate, mail-order fill rate, and rebate minimums with financial penalties.
Termination rights
Employer can terminate for cause without penalty if the PBM breaches contract terms or fails performance guarantees.
03 — PBM Evaluation
How we evaluate and profile PBMs
PBM profiles on this cluster are built from public information, employer-reported experience, state Medicaid audit findings, and academic research. We do not accept PBM-sponsored content.
| Dimension | Priority | What we assess |
|---|---|---|
| Pricing model | Critical | Pass-through vs. spread; rebate pass-through percentage; MAC transparency |
| Formulary design | High | Clinical rigor, step therapy, prior authorization criteria, specialty tier management |
| Specialty pharmacy | High | Specialty drug cost management, white-bagging, site-of-care steerage, copay accumulator programs |
| Rebate management | High | Rebate pass-through rate, rebate audit rights, price protection provisions |
| Clinical programs | Medium | Medication therapy management, adherence programs, high-risk member outreach |
| Reporting & analytics | Medium | Real-time claims data, formulary analytics, drug trend reporting |
| Network access | Medium | Retail network breadth, preferred pharmacy programs, mail-order capabilities |
| Contract terms | High | Audit rights, termination provisions, performance guarantees, MAC appeal process |
04 — Benchmark Data
Where our PBM benchmark data comes from
Pharmacy cost benchmarks are drawn from CMS drug spending data, academic research, and employer surveys. We do not use PBM-provided benchmark data without independent corroboration.
CMS National Drug Expenditure Data
Annual drug spending by category, used to contextualize specialty drug cost trends and rebate estimates.
PCMA / PBMI Employer Drug Benefit Survey
Annual survey of employer pharmacy benefit practices, formulary design, and PBM contract terms.
State Medicaid PBM audit reports
State-commissioned audits (Ohio, Kentucky, Arkansas, others) that quantified spread pricing and rebate retention — the most rigorous public data on PBM pricing practices.
IQVIA National Prescription Audit
Prescription volume and spending data used to benchmark generic dispensing rates and specialty drug utilization.
Academic research (JAMA, NEJM, Health Affairs)
Peer-reviewed studies on rebate pass-through rates, formulary design, and PBM market concentration.
Employer-reported RFP response data
Anonymized employer-reported data on PBM pricing proposals, rebate guarantees, and contract terms.
05 — AI Analysis
How AI is used in PBM strategy tools
The PBM Contract Review and PBM Comparison tools use GPT-4o to analyze contract language and vendor profiles. This section documents what the AI does and does not do.
PBM Contract Review
- Identifies non-standard or employer-unfavorable contract language
- Flags missing transparency provisions against the 8-criteria framework
- Highlights spread pricing, rebate retention, and audit restriction language
- Generates specific negotiation points and RFP questions
PBM Comparison
- Synthesizes structured vendor profile data into narrative analysis
- Identifies alignment between employer pharmacy spend profile and PBM capabilities
- Flags fields requiring RFP confirmation vs. verified facts
- Does not access real-time pricing or current contract terms
06 — Limitations
What our PBM research cannot tell you
PBM pricing is among the most opaque in healthcare. Our methodology has specific limits that every employer should understand.
Real-time PBM pricing
PBM pricing is negotiated and changes with every contract cycle. Published benchmarks reflect historical data. Your actual rebate guarantee, ingredient cost pricing, and dispensing fees will differ from any published estimate.
Specialty drug pipeline impact
Specialty drug costs are driven by pipeline approvals that change quarterly. Our specialty pharmacy analysis reflects current market conditions, not future drug launches or biosimilar approvals.
Formulary clinical outcomes
We assess formulary design criteria, not clinical outcomes. A formulary that scores well on transparency criteria may still produce suboptimal clinical outcomes for specific member populations.
PBM contract negotiation leverage
Negotiating leverage depends on group size, competitive alternatives, and timing. Our analysis identifies what to negotiate, not what a specific employer can realistically achieve.
Legal interpretation
PBM contract language is complex and jurisdiction-specific. Our analysis identifies provisions of concern — it does not constitute legal advice or a legal opinion on contract enforceability.