We recently covered the key components of a PBM contract, but it goes further than words on a page. The discounts, rebates, and projected savings only account for part of the story. In order to find true alignment with your next PBM partner, the following five questions can help shape the tough conversations plan sponsors across the country are having this time of year.
Starting off strong…
1. How Do You Make Money?
This quickly gets to the root of it all: What drives the PBM’s revenue?
Depending on the model, traditional PBMs can generate revenue in a variety of ways, including hidden fees, spread pricing, rebate retention, and pharmacy arrangements. Given the options available in the marketplace, employers should understand exactly how their PBM is compensated.
A transparent discussion about revenue sources can help organizations identify potential conflicts of interest and better understand the incentives that may influence decision-making. The goal isn't necessarily to find a PBM that makes the least amount of money. Rather, it's to ensure that compensation is clearly disclosed and that both parties understand how value is being created within the relationship.
2. If Discounts or Rebates Improve During the Contract Term, Do We Benefit?
The pharmacy marketplace changes constantly. Drug prices fluctuate, manufacturer rebate programs evolve, and pharmacy network contracts are regularly renegotiated.
When improvements occur, plan sponsors should understand whether those savings flow through to the plan or remain with the PBM. Some contracts lock financial guarantees at the outset of the agreement, while others allow employers to benefit from favorable market changes as they occur.
Asking this question helps determine whether the PBM's success is tied to the client's success. It can also uncover opportunities for greater transparency regarding how pricing improvements are tracked, reported, and shared throughout the contract term.
3. Are You Willing to Offer a One-Year Contract?
Contract length may seem like a minor detail, but it can reveal a great deal about a PBM's confidence in its ability to deliver results.
Multi-year agreements are common throughout the industry and can provide stability for both parties. However, shorter contract terms may offer employers greater flexibility to reassess performance, respond to changing business needs, or evaluate alternative solutions.
If a PBM is reluctant to consider a shorter agreement, it may be worth exploring the reasons why. Employers should understand any renewal provisions, termination clauses, and performance-based protections available within the contract. The objective is to create a relationship built on ongoing value rather than contractual obligation.
4. Do You Offer a Net Cost Savings Guarantee?
Discount guarantees and rebate guarantees can be a helpful tool when making a big decision like switching PBM vendors, acting as a safety net to protect your resources.
A net cost savings guarantee, like those often offered by MedOne, focuses on the overall financial outcome rather than individual pricing components. This broader perspective can help plan sponsors evaluate whether the benefit is delivering meaningful value after all costs, fees, and rebates are considered.
By discussing net cost performance, employers can shift the conversation away from isolated metrics and toward the results that matter most: controlling pharmacy spend while maintaining appropriate access to medications for members.
5. Do You Pass Through 100% of Manufacturer Rebates?
Manufacturer rebates continue to play a significant role in pharmacy benefit economics, making rebate transparency a critical contract consideration.
When evaluating rebate arrangements, employers should seek clarity on what percentage of rebates are returned, how rebates are calculated, and whether any administrative offsets or exclusions apply. Some arrangements provide full rebate pass-through, while others allow a PBM to retain a portion of rebate revenue as part of its compensation model.
Understanding how rebates are managed helps employers make more informed comparisons between competing proposals and better evaluate the true financial impact of each arrangement.
Looking Beyond the Proposal
The best PBM relationships are built on more than pricing guarantees and contract language. They are grounded in trust, transparency, and a shared commitment to achieving better outcomes for both the plan and its members.
By asking strategic, intentional questions early in the evaluation process, employers can gain a clearer picture of how a PBM operates, what drives its business decisions, and whether its approach aligns with the organization's long-term goals. In an increasingly complex pharmacy landscape, these conversations can help transform a standard vendor selection process into a strategic partnership that delivers lasting value.