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New Report Shows PBMs Are Increasing Costs for Patients and the Health Care System

Misaligned Incentives Allowed PBM Gross Profit to Grow 12% in Just Two Years


Mike Kapsa



Dec. 2, 2021

Washington, DC – The PBM Accountability Project today released a new report that sheds light on how pharmacy benefit managers (PBMs) are finding new and hidden ways to profit off of the role that they play in managing prescription drug benefits for consumers, businesses, unions, government and other payers. The report, “Understanding the Evolving Business Models and Revenue of Pharmacy Benefit Managers,” shows that between 2017 and 2019, PBM gross profit increased by 12%, from $25 billion to $28 billion, but the sources of these profits changed substantially over the same period. It concludes by considering the impact of PBM incentive structures and the need to include PBM reforms in prescription drug policy discussions.

The PBM Accountability Project report, based on research conducted in collaboration with data analytics firm 3 Axis Advisors, found that, despite decreases in PBM retention of manufacturer rebates between 2017 and 2019, overall PBM gross profit increased. Over the study period:

  • PBM gross profit from retained administrative fees paid by manufacturers for services provided by PBMs increased 51%, from $3.8 billion to $5.7 billion.

  • Gross profit from PBM-owned mail order and specialty pharmacies increased by more than 13% from $8.9 billion in 2017 to $10.1 billion in 2019.

  • Gross profit from “other sources,” including spread pricing, pharmacy fees and clawbacks, fees collected from payers, and other non-administrative fees collected from manufacturers grew by nearly 26%, from $8.5 billion in 2017 to $10.7 billion in 2019. Although these “other sources” constitute nearly 40% of all PBM gross profit, analysis of the publicly available financial data sheds little light on how much gross profit is derived from the specific components.

“This report casts light on a PBM business model that has truly been a black box for working families, employers, unions and taxpayers who are saddled with the rising costs of prescription medicines,” said Mark Blum, Executive Director of America’s Agenda, a founding member of the PBM Accountability Project. “PBMs have been remarkably adept at creating clever ways to divert prescription drug savings away from health plan sponsors and patients and into their own growing profit. The findings in this report bring all of us out of the dark to clearly see the kinds of reforms that are needed to return prescription drug savings back to American workers, employers, patients and taxpayers who ultimately pay the bill.”

Antonio Ciaccia, President of 3 Axis Advisors, added: “With PBMs essentially at the center of the U.S. drug supply chain, it begs for scrutiny of how their business practices may exacerbate drug pricing dysfunction and excess. As PBMs claim to be the only entity working to control drug prices, we believe that analyses like this report can shed light on the incentives and opportunities PBMs have to inflate costs rather than provide savings to plan sponsors and patients.”

The report also reveals that, while total PBM gross profit increased over the study period, the sources of PBM gross profit shifted due to changes in contracting practices, competitive pressures and public scrutiny.

“Against this backdrop, PBMs continue to operate under a relative cloak of secrecy,” Ciaccia said. “The report confirms much of our prior research: While PBMs shift the sources of their revenue, they are also finding significant opportunities for growth along the way – often at the expense of payers, health plans, pharmacies, patients and even manufacturers. Looking ahead, we can expect that PBMs’ revenue sources will continue to evolve in response to changing market dynamics.”

The report discusses the market dynamics and misaligned incentives that have resulted in system-wide inefficiencies and allowed PBMs to drive up costs for patients, employers and the overall health care system:

  • PBMs benefit directly from prescription medicine list price growth, leading to misaligned incentives in the system. Several sources of PBM revenue for medicines are linked directly to the list price of the medicine. When the list price of a medicine goes up, the PBM often collects more revenue. These misaligned incentives can drive up costs for plans and patients.

  • Excess complexity and information asymmetry in the market prevent payers and patients from properly evaluating PBM decisions or drug costs. Pricing complexity and lack of transparency allows PBMs to buy products or services from one stakeholder in the system and sell the same products or services to other stakeholders at higher prices, without the payer understanding the true cost or inflationary nature of the services purchased.

  • Lack of meaningful PBM industry standards, limited transparency and lack of regulatory oversight enable PBM revenue growth. Many PBM contracting mechanisms and revenue sources lack agreed-upon definitions, providing PBMs with the broad discretion to design the terms of a complex contract in their favor.

These findings highlight the need for consideration of new approaches to realigning PBM incentive structures as part of prescription drug policy discussions, including delinking PBM compensation from the list price of medicines, requiring rebates and discounts to be shared with plans and patients at the pharmacy counter, ensuring patient choice of pharmacies, limiting spread pricing within Medicaid, and establishing disclosure requirements for employers and commercial health plans.

The full report is available on the PBM Accountability Project website. The PBM Accountability Project, a coalition made up of stakeholders across healthcare, labor, business, pharmacy and consumer/patient advocacy, is working to educate the public and advance solutions to help redirect prescription drug savings from PBMs back to patients, employers, health plans and taxpayers.

Health and policy experts weighed in on the report:

Sally Greenberg, Executive Director of the National Consumers League: “Over time, PBMs have found ways to take advantage of a lack of transparency and oversight to increase their profit. This report showcases not only the many ways they do this, but also just how much money they’re making from these tactics. We must find policy solutions to bring that money – those savings – back to consumers as intended.”

Rebecca Snead, Executive Vice President and Chief Executive Officer of the National Alliance of State Pharmacy Associations: “We’ve seen firsthand the negative impact PBMs have on pharmacies across the country, which also impacts access to care. These multi-billion-dollar middlemen put profit first – at the expense of community pharmacies with their arbitrary, retroactive fees. We need to reform the system to help pharmacists better serve their patients.”

David Balto, Former Policy Director of the Federal Trade Commission and Antitrust Attorney: “PBMs engage in a variety of tactics to increase costs and deny consumers necessary drugs. This report reinforces how they maintain a stranglehold on prescription drug pricing and distribution. Ultimately, consumers pay more for essential life sustaining drugs for ramped up drug costs through PBMs’ complex schemes. Something must be done to address the anti-competitive practices of the middlemen who have so much control of the supply chain.”


About The PBM Accountability Project

The PBM Accountability Project brings together leaders and stakeholders across healthcare, labor, business, pharmacy and consumer patient advocacy to help ensure that patients and our private and public sector health plans aren’t overpaying for the prescription medicines we need. Our organization is working to educate the public and advance solutions to help redirect prescription drug savings from very high PBM profits back to patients, employee health plans and taxpayers. To learn more about the PBM Accountability Project, visit


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