Pass Through Pricing Is the New PBM Reality: Why Efficiency Has to Replace Margin Complexity

Pharmacy Benefit Manager (PBM) pricing is moving into a new era.

For years, many PBM arrangements have been evaluated through a mix of discounts, rebates, guarantees, spread pricing discussions, administrative fees, network terms, specialty pharmacy arrangements, and contract definitions. That complexity has not disappeared. But the direction of travel is clear: requestors want more transparency, regulators are paying closer attention, and the market is putting more pressure on traditional PBM pricing models.

For health plans, coalitions, unions, specialty pharmacies, employer groups, and procurement teams, referred to as requestors moving forward, the shift toward Pass Through Pricing is not just a pricing conversation. It is a procurement conversation.

If more revenue must be explicit, more costs must be controlled. If margins shrink, PBMs need a more efficient way to package, present, compare, and sell their offerings. If requestors are expected to evaluate PBM compensation more carefully, they need clearer information earlier.

That is where Proposals for Requestors (PfRs) become important.

Pass Through Pricing changes the economics. PfRs can help change the cost structure around procurement.

What Pass Through Pricing Means in PBM Procurement

Pass Through Pricing generally refers to a PBM pricing model where certain drug costs, discounts, or rebates are passed through to the plan or requestor, while the PBM is compensated through more explicit administrative fees or other stated compensation.

The exact contract terms matter. “Pass-through” can be used differently across the market, and requestors should never rely on the label alone. They need to understand what is passed through, what is excluded, how fees are defined, how rebates are handled, whether pharmacy reimbursement is disclosed, and how audit or reporting rights support verification.

Still, the broad concept is easy to understand.

Traditional PBM pricing often allowed compensation to be embedded in different parts of the economic arrangement. Pass Through Pricing is designed to make the economics more visible.

KFF describes federal PBM reform efforts that include prohibiting spread pricing in Medicaid and instead basing payments on a pass-through model tied to the drug ingredient cost and a professional dispensing fee.

That does not mean every commercial arrangement will look the same. But it does show where the policy conversation is moving.

Traditional PBM Pricing Is Under Pressure

Traditional PBM Pricing is not disappearing overnight. PBM contracts are complex, and different requestors may prefer different pricing structures depending on their needs, size, risk tolerance, administrative capacity, and reporting expectations.

But the pressure is real.

The Federal Trade Commission has continued to examine PBM practices and prescription drug market dynamics, including concerns about pricing, reimbursement, and drug cost effects.

The Department of Labor has also proposed PBM fee disclosure rules intended to help plan fiduciaries understand PBM compensation flows, identify potential conflicts of interest, and assess whether arrangements are reasonable under ERISA.

At the state level, PBM regulation has expanded significantly. NASHP reports that all 50 states have passed legislation regulating PBMs, with common provisions covering topics such as licensure, transparency, reporting, pharmacy reimbursement, network rules, and compensation practices.

This does not mean every rule is the same or that every legal outcome is settled. PBM regulation is complex and evolving.

But for executives, the strategic message is plain: PBM pricing models are being pushed toward more transparency, more explicit compensation, and more scrutiny.

Pass Through Pricing Can Shrink Margins

Pass Through Pricing can be attractive to requestors because it promises clearer economics.

But for PBMs, that clarity may come with margin pressure.

If revenue that was previously embedded in pricing mechanics, rebate treatment, or spread-based arrangements becomes more explicit or limited, PBMs may need to rely more heavily on administrative fees, service fees, value-based performance, or clearly stated compensation.

That is not necessarily bad. Transparent compensation can support trust. It can make proposals easier to explain. It can align PBMs more clearly with the requestor’s goals.

But it does create a business challenge.

If revenue opportunities narrow, operating efficiency becomes more important.

PBMs cannot respond to margin pressure only by adjusting price. They also need to examine the cost of selling, the cost of responding to bids, the cost of repeated legal review, the cost of Subject Matter Expert involvement, and the cost of long procurement cycles.

A PBM that moves into a Pass Through Pricing environment but keeps the same expensive procurement process may solve one transparency problem while leaving a major cost problem untouched.

The Procurement Cost Problem

PBM procurement is expensive.

A legacy Request for Proposal (RFP) process often requires PBMs to involve proposal writers, pricing teams, clinical leaders, network experts, rebate specialists, implementation teams, legal reviewers, compliance leaders, account teams, and executives.

That is a large amount of labor before the PBM has won anything.

For requestors, the cost is also significant. They may involve benefits leaders, consultants, procurement teams, legal counsel, finance, clinical advisors, operations teams, and executive stakeholders.

In a high-margin environment, inefficient sales and procurement costs may be easier to absorb. In a lower-margin, more transparent pricing environment, they become much harder to justify.

Pass Through Pricing makes this problem more visible because it pushes more of the economic conversation into the open. If compensation is explicit, then waste becomes harder to hide.

The question becomes: why should PBMs and requestors keep spending so much expensive labor on repetitive procurement work?

The Old PBM RFP Model Was Built for Customization

Legacy PBM RFPs have a valid purpose.

Some contracts require detailed customization. Some requestors need unique plan design, unusual network requirements, complex specialty pharmacy arrangements, specific reporting needs, legal constraints, or multi-stakeholder evaluation.

For those situations, a formal RFP may still make sense.

But many early-stage PBM evaluations ask the same categories of questions:

• What pricing model is available?
• How are rebates handled?
• Is this a Pass Through Pricing model?
• What administrative fees apply?
• What pharmacy networks are supported?
• What specialty pharmacy options exist?
• What clinical programs are included?
• What implementation timeline is realistic?
• What reporting and audit rights are available?

These questions matter, but they do not need to be rebuilt from scratch every time.

When PBMs face pricing pressure, repeating the same custom proposal work becomes less sustainable. The old model asks PBMs to spend heavily before they know whether the opportunity is serious, qualified, or commercially aligned.

That is not efficient.

PfRs Are a Better Fit for a Pass Through Pricing Market

PfRs are vendor initiated procurement offerings made available to qualified requestors through a controlled online marketplace. They are structured using standardized templates. They are not public sales collateral. They are not buyer initiated. They are not tailored to one specific requestor.

In a Pass Through Pricing environment, PfRs make strategic sense.

A PBM can present a structured offering that clearly explains pricing model, administrative fees, rebate treatment, pharmacy reimbursement approach, network options, clinical programs, specialty pharmacy capabilities, implementation expectations, reporting, and guarantees.

A qualified requestor can then discover, review, and compare that offering after access requirements are met.

This changes the cost profile.

Instead of creating a bespoke response for every early-stage opportunity, the PBM can invest once in a well-constructed, SME-reviewed, structured offering. That offering can be reused across qualified marketplace discovery.

Instead of launching a full RFP just to understand available options, requestors can compare structured offerings earlier.

That matters when PBM margins are under pressure.

The PBM that can reduce procurement waste may be better positioned to operate profitably under more transparent compensation models.

Pass Through Pricing Needs Operational Discipline

Pass Through Pricing is not just a contract label. It requires operational discipline.

A PBM needs to clearly define fees, rebate treatment, pharmacy reimbursement, reporting processes, audit rights, and performance expectations. Requestors need to understand how the model works and what they should compare.

If everything becomes more visible, loose explanations become harder to defend.

That is why structured data matters.

A PfR-based model allows PBMs to present pricing and service terms in defined fields. It gives requestors a more consistent way to review offerings. It gives consultants and brokers a cleaner starting point for analysis. It creates a better foundation for comparison than long narrative documents alone.

This is also where Artificial Intelligence (AI) can help, but only in a practical way.

AI can assist with search, summaries, comparison fields, and identifying gaps when the underlying data is structured. It should not replace human judgment, legal review, fiduciary responsibility, or PBM expertise.

The better model is simple: structured data first, AI assistance second, human decision making always.

Efficiency Is Becoming a Competitive Advantage

As Traditional PBM Pricing comes under pressure, efficiency becomes more than an internal operations goal.

It becomes a competitive advantage.

A PBM that can package offerings clearly, reduce proposal rework, minimize repeated SME involvement, and shorten sales cycles may protect more of its economics even as pricing becomes more transparent.

A requestor that can compare offerings faster may reduce advisory costs, internal review burden, and delays.

Both sides benefit when the procurement process uses fewer resources to reach a serious conversation.

Pass Through Pricing makes this more urgent because it reduces tolerance for hidden inefficiency. If the market is demanding clarity on compensation, it should also demand clarity on process cost.

Every unnecessary procurement step has a price.

The Future Is Not Just Pass Through Pricing. It Is Pass Through Procurement.

The phrase “Pass Through Pricing” focuses on economics.

But the broader shift is about trust.

Requestors want to understand what they are paying, what they are receiving, how the PBM is compensated, and whether the arrangement supports the needs of their members or covered populations.

PBMs need to adapt to that reality without destroying their own economics.

That means doing more than changing pricing models. It means changing how PBM offerings are presented, discovered, compared, and evaluated.

The next phase of PBM procurement should be faster, clearer, more structured, and less dependent on repetitive custom work.

Pass Through Pricing may define the new compensation conversation.

PfRs can define the new procurement workflow.

Traditional PBM Pricing Is Under Pressure, But PBMs Are Not Powerless

PBMs are being asked to adapt.

Regulatory scrutiny is increasing. Requestors are asking harder questions. Pass Through Pricing and rebate transparency are becoming more central to procurement discussions. Traditional PBM Pricing models are facing more pressure than they did a decade ago.

That does not mean PBMs have no path forward.

It means they need to protect value differently.

In a more transparent market, PBMs will need to compete through operational quality, clinical performance, network strength, reporting, implementation, service, and efficiency. They will also need to reduce waste in how they engage the market.

PfRs are a prime alternative to engaging through long, expensive, custom RFP cycles when full customization is not required.

They allow PBMs to present structured offerings, reduce repetitive response work, support clearer Pass Through Pricing comparisons, and help requestors move faster from discovery to serious evaluation.

Traditional PBM Pricing is under pressure.

Long live Pass Through Pricing.

But in a pass-through world, pricing transparency is only half the work.

The other half is building a procurement process efficient enough to survive it.

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Rapid Request is building a structured marketplace approach to PBM procurement, designed to help qualified requestors discover and compare vendor initiated PfRs with less waste, clearer information, and a faster path to serious evaluation.

To understand why this matters, read more about why PBM procurement is fundamentally a comparison problem.