Following heightened FTC scrutiny and antitrust lawsuits, the three largest pharmacy benefit managers (PBMs) have each announced pass-through models. For benefits leaders, the label of “pass-through” is likely to appear in every proposal, but it will not mean the same thing in each case. A PBM can pass through a rebate or a pharmacy price and still earn margin somewhere else in the supply chain, which is why the contract matters more than the label.

The practical question for a plan sponsor is where a PBM and its affiliates earn money, and whether any of that revenue rises when drug costs rise. Use the five tests below to spot the difference in your next RFP or market check.

True vs. "Fake" Pass-Through at a Glance

When every PBM today calls itself pass-through, it’s important to understand the mechanics behind plan performance and how a PBM makes its money. Here are the contract features worth digging into and what qualifies a PBM as truly pass-through based on its response. 

The Five Pillars of a True Pass-Through PBM

Never take a PBM’s word for being pass-through. Let’s examine the core pillars of a truly pass-through PBM and how you can vet a PBM against these standards during an RFP or market check.

1. Revenue Source

When a PBM's only revenue is a fixed, clearly defined administrative fee that does not move with drug mix, utilization, or rebate volume, it has no financial reason to prefer a costlier drug. A red flag that a PBM’s revenue source may not be aligned is an admin fee that is waived or set unusually low. That usually means the PBM expects to earn elsewhere, through spread, retained rebates, or other fees.

Ask: For a written list of every way the PBM and its affiliates earn revenue tied to this plan. A complete answer in a true pass-through arrangement is short.

2. Claims Pricing

The test is simple: is the plan billed exactly what the pharmacy was paid? That should hold for every channel and every pharmacy, including PBM-owned pharmacies, where the price should reflect actual acquisition cost. Spread on certain drug categories or channels, or a "negotiated" rate with an owned pharmacy that the PBM itself sets, means the pass-through only applies where it is convenient.

Ask: For pharmacy-level pricing, showing the amount paid to the pharmacy next to the amount charged to the plan, across retail, specialty, and mail.

3. Manufacturer Revenue

True pass-through returns 100% of manufacturer compensation to the plan: rebates, fees, and credits, across all channels, including specialty and mail. A common gap is relabeling. If only items called "rebates" pass through, money that arrives as an admin, service, or data fee can be retained without technically breaking the contract.

Ask: Which manufacturer payments the contract defines as passed through, and whether any payment from a manufacturer, under any name, can be kept by the PBM or its affiliates.

4. Affiliate Leakage

A PBM can pass through every dollar it receives itself while affiliated entities keep margin outside the contract's definition. The cleanest structure has no affiliated pharmacies, drug makers, or GPOs. If affiliates exist, their payments need to be included in the pass-through, not carved out of it.

Ask: For a list of every affiliated pharmacy, drug supplier, and purchasing entity, how plan claims route to each, and how each earns revenue from those claims.

5. Pricing Consistency

With one price list per pharmacy for every client, no client subsidizes another. With many lists, pricing can be shifted between clients. Pass-through clients may be overcharged to offset underpriced spread clients, or clients on older contracts may pay more than newer ones for the same drug at the same pharmacy, with the difference staying with the PBM.

Ask: How many price lists the PBM maintains per pharmacy, and whether pricing improvements reach existing clients immediately or only at renewal.

How to Vet Pass-Through PBMs in an RFP

Vetting a PBM against these five tests works best when RFP answers become written obligations in the final contract. A short request list makes the comparison cleaner:

• A written list of every PBM revenue stream, including those earned by affiliates.

• A list of all affiliated entities and a statement of how each earns revenue from plan claims.

• Pharmacy-level pricing, so the plan can compare the price paid to the pharmacy against the price charged to the plan.

• The number of price lists maintained per pharmacy, and when improvements reach existing clients.

Pass-through is a useful starting point, but it is not an absolute standard. The plans that gain the most from the new industry language are the ones that test the structure behind the term: how the PBM earns revenue, what the plan is billed for, which manufacturer payments come back, where affiliates sit, and whether every client gets the same pricing.

Want help pressure-testing a PBM proposal for true pass-through mechanics? Talk to one of our PBM experts. 

Frequently Asked Questions

What is a pass-through PBM?

A pass-through PBM returns rebates, discounts, and pharmacy payments to the plan at the amounts it received, rather than keeping a portion as spread or retained rebates. Plans should also confirm how the PBM is paid and whether affiliated entities earn margin on plan claims.

What is the difference between true and "fake" pass-through PBMs?

A true pass-through PBM earns only a fixed administrative fee, bills the plan exactly what the pharmacy was paid, returns 100% of manufacturer compensation, has no affiliate leakage, and keeps one price list per pharmacy. A ‘fake’ pass-through PBM uses the same label while spread, relabeled revenue, affiliate margin, or multiple price lists still move money away from the plan.

Does pass-through pricing mean there is no spread pricing?

Not automatically. A contract can eliminate spread on the PBM's own books while an affiliated pharmacy or a "negotiated" owned-pharmacy rate still earns margin on the same claims. Ask for the pharmacy-level price paid and the price charged to the plan.

How does a PBM earn money under a true pass-through model?

Its only revenue is a fixed, clearly defined administrative fee that does not vary with drug mix, utilization, or rebate volume. Any other revenue stream, from manufacturers, pharmacies, or affiliates, is a signal to look closer.

Why do multiple price lists matter in a pass-through contract?

When a PBM maintains many price lists for one pharmacy, it can shift costs between clients. Pass-through clients may be overcharged to offset underpriced spread clients, or older contracts may pay more than newer ones for the same drug. One price list per pharmacy means no client subsidizes another.