When employers compare pharmacy benefit manager (PBM) bids, administrative fees offer a starting point for understanding what each partner charges to manage the pharmacy benefit. The fee may be easy to find in a proposal, but its amount alone does not tell you what the service will cost your plan.

A PBM can earn compensation from several sources, and these aren't always evident. Alongside the fee your plan pays directly, the PBM may retain revenue through drug pricing or arrangements with manufacturers and pharmacies. These sources can vary by contract, making a low administrative fee one part of a broader financial picture.

To evaluate a PBM's administrative fee, employers need to know how it is calculated, which services it covers, and what else the PBM earns. Thanks to pushes for PBM reform and new legislation, large self-insured plans will have the right to details about PBM compensation at contracting and renewal, helping employers put the administrative fee in context.

What Are PBM Administrative Fees?

PBM administrative fees are the compensation a plan pays its PBM directly for administering the pharmacy benefit. These fees may be charged per claim, per participant, at a flat rate, or through another method, according to the Department of Labor’s (DOL) final rule on PBM fee disclosure.

One example of direct compensation is a per-participant, per-month fee, commonly known as a per member, per month (PMPM) fee. In its fact sheet on the rule, DOL lists PBM services such as negotiating rebates, managing formularies and pharmacy networks, utilization review, claims processing, and compliance. PBM agreements outline which services the base fee includes and which may carry separate charges.

Per-Claim, PMPM, and Flat Fee Structures

The fee's unit matters for budgeting because it determines whether a PBM administrative fee moves with enrollment, with prescription volume, or not at all.

No structure is inherently better. A PMPM or flat fee gives finance teams a predictable line, while a per-claim fee rises whenever members fill more prescriptions. The more useful question is whether any part of the PBM's pay grows as drug spend grows.

How Administrative Fees Fit Into Total PBM Compensation

The administrative fee is direct compensation. A PBM can also receive indirect compensation from drug manufacturers, pharmacies, and other entities. The Department of Labor's 2026 PBM fee disclosure rule names the main items plans will see disclosed:

Because DOL treats manufacturer administrative fees as separate from rebates, check how your PBM's contract handles rebates and whether those fees pass through to the plan. Plan cost depends on every stream together, so the admin fee alone cannot tell an employer what a PBM earns on its plan.

Why a Low or Waived Administrative Fee Needs Context

A low or waived administrative fee can look like a good deal, but it may be only one part of the PBM’s compensation. In a spread pricing arrangement, the PBM retains the difference between what it charges the plan for a prescription and what it pays the pharmacy. Without clear disclosure, employers may have limited visibility into that additional cost.

A low quoted fee can also grow after signing through ad hoc surcharges that inflate cost. Examples include separate charges for reports, data access, or compliance work.

For employers, a fee comparison across bids holds only when every bidder discloses its other compensation on the same terms. Without that, the lowest fee line says little about which bid will cost the plan least.

How to Evaluate a PBM Administrative Fee

Employers comparing RFP bids or preparing for renewal can use these guidelines to put each PBM administrative fee in context.

• Confirm which services the base fee includes and which carry separate charges, because add-on fees change the real cost of administration.

• Ask what the fee is calculated on and whether it changes when drug spend rises, since that shows how the PBM's incentives move.

• Request every other compensation source and the share passed to the plan, including manufacturer administrative fees, so the fee is read in full context.

• Secure audit rights and claim-level data access, because disclosures are only as useful as the plan's ability to verify them.

• Compare bids on total PMPM cost, combining admin fees and net drug cost, because that is what the plan spends.

The answers belong in the contract itself. Fixed fee terms, audit rights, and spread restrictions are among the PBM contract terms that preserve procurement leverage at the next renewal.

What the DOL Final Rule Changes for Administrative Fee Disclosure

Finalized in October 2026, the Department of Labor’s (DOL) PBM fee disclosure rule requires PBMs serving large self-insured group health plans to disclose their compensation.

PBMs must disclose direct compensation by service and indirect compensation, including manufacturer payments, spread compensation, and pharmacy recoupments. They must provide initial disclosures before contracting or renewal and follow with ongoing disclosures. Plan fiduciaries may also choose to audit those disclosures.

How SmithRx Approaches PBM Administrative Fees

Employers need a straightforward administrative fee and an incentive structure they can verify. We earn revenue through a fixed PMPM administrative fee and pass through 100% of manufacturer rebates to the plan. We do not use spread pricing, so the plan pays what the pharmacy is paid.

That model structure means our compensation does not increase when medication costs rise, which keeps our incentives aligned with the plan's. What's more, our clients have all plan data at their fingertips and can verify these terms at any time. Our commitment to capturing the lowest net cost for prescription medications, coupled with our radically transparent model, has led to SmithRx clients achieving 20%+ lower PMPM than industry benchmarks.

A PBM administrative fee is one part of PBM compensation, and its value depends on everything else the model lets the PBM earn. Employers who compare bids on total PMPM and check them against disclosures are better positioned to judge which fee structure serves their plan.

Frequently Asked Questions

Are PBM administrative fees negotiable?

Yes. PBM administrative fees are contract terms, so the amount, unit, and included services are set during contracting or renewal. Employers gain leverage by comparing bids on total disclosed compensation/net plan cost.

Do smaller or fully insured employers get the same PBM fee disclosures under the DOL's 2026 rule?

The detailed rule covers large self-insured plans only, according to DOL's summary, so smaller and fully insured plans do not receive the same itemized disclosures. Their service providers must still meet the statutory disclosure requirements of ERISA section 408(b)(2)(B).

What are the different types of PBM administrative fees?

PBM administrative fees may be charged per claim, per member per month (PMPM), or as a flat fee. A per-claim fee varies with prescription volume, a PMPM fee varies with enrollment, and a flat fee is a set amount for the agreed term. Employers should confirm which services each fee covers and whether additional charges apply.