PBM Integration and Specialty Pharmacy Margins: The Rebate Report Leaves Money Out

PBM affiliated specialty pharmacy markups generated more than $7.3 billion in dispensing revenue above estimated acquisition cost on selected specialty generics, according to the Federal Trade Commission. Inside an integrated healthcare business, the pharmacy earning that revenue can share an owner with the PBM managing the benefit and the insurer paying for it. If you work in specialty pharmacy contracting, claims or finance, you may see the payment that a rebate report leaves outside its totals.

The PBM Manages the Benefit and the Pharmacy Dispenses the Drug

Vertical integration puts different jobs under common ownership. The PBM administers pharmacy benefits and negotiates payments. The pharmacy buys and dispenses medicine. An insurer can belong to the same group. Each role has its own contracts, costs and receipts. For a concrete ownership example, Cigna’s annual filing describes Express Scripts administering benefits and Accredo dispensing specialty drugs within Evernorth.

Specialty dispensing adds work around the prescription. The Government Accountability Office describes drugs requiring specialized transportation, storage, patient education and monitoring. Manufacturers may restrict distribution to selected pharmacies. A pharmacy’s access to a manufacturer’s drug and its participation in the patient’s benefit network answer different questions: whether it can obtain the product and whether the plan will pay it to dispense that product.

The financial paths are just as distinct. The sponsor pays the PBM under one agreement. The PBM pays the pharmacy under another. The pharmacy pays its supplier. Manufacturer rebates and service payments follow their own agreements. Later contract adjustments determine what each business ultimately keeps.

Three PBMs Dominate Prescriptions and Specialty Revenue

The largest PBMs’ share of prescriptions and their pharmacies’ share of specialty revenue measure different kinds of concentration. The Federal Trade Commission’s July 2024 staff report, citing industry estimates, said the three largest PBMs processed nearly 80% of prescriptions dispensed by U.S. pharmacies in 2023. Their affiliated pharmacies accounted for nearly 70% of specialty-drug revenue.

Ownership lets the same corporate group manage the benefit and earn the dispensing revenue. An independent pharmacy seeking network access faces a business that also owns pharmacies.

The HHS Office of Inspector General found similar concentration in Medicare. Its May 2026 study of Medicare Part D found that six integrated organizations accounted for 82% of gross Part D spending in 2023.

Specialty-Generic Markups Leave a Wide Gap

The Federal Trade Commission compared affiliated-pharmacy dispensing revenue with National Average Drug Acquisition Cost, a benchmark based on retail community pharmacy invoices. Its January 2025 second interim report analyzed submissions from CVS Caremark, Express Scripts and OptumRx covering 51 specialty generic drugs. The selected claims involved commercial insurance and Medicare Part D.

From 2017 through part of 2022, the comparison put $10.0 billion in dispensing revenue against $2.7 billion in estimated acquisition cost, before operating expenses. That is a substantial gap even before anyone starts arguing over the label.

For commercial claims from 2020 through 2022, affiliated pharmacies marked up 63% of the analyzed drugs by more than 100% above NADAC. Markups exceeded 1,000% for 22% of those drugs. An insider’s purchasing ledger shows what the pharmacy actually paid.

The payer split matters to anyone considering a government-payment case. Commercial claims accounted for $5.9 billion of the revenue above NADAC, while Part D accounted for $1.4 billion. The report also estimated approximately $1.4 billion in spread between plan charges and pharmacy payments. That second figure measures a different transaction, with 97% attributed to commercial claims and 90% to prescriptions at unaffiliated pharmacies.

Do Integrated Part D Plans Cost Patients More?

Patients without financial assistance paid more out of pocket for the drugs in the Inspector General’s sample when enrolled in integrated plans, even though those plans had lower monthly premiums. The Government Accountability Office asked a different question: how payments at owned pharmacies compared with payments at other pharmacies within selected integrated sponsors.

Similar Plan Costs, Higher Patient Payments

For its selected sample of 60 drugs or drug groups in 2023, the Inspector General found that overall net sponsor costs differed by less than 1%. Integrated sponsors generally paid more upfront and received more back through rebates and fees. Those later receipts brought the sponsors’ costs close together.

The patient’s experience was different. Among enrollees receiving no financial assistance, those in integrated sponsors’ plans paid nearly 40% more out of pocket for the sampled drugs.

Similar net costs for the sponsor. Higher drug costs at the counter for the sampled patients. We care about that distinction because a saving credited to the plan and a saving received by the patient land in different places.

Owned Pharmacies and Mail Order

The Government Accountability Office examined four integrated Part D sponsors in 2023. For at least 94% of the 100 most-used drugs, payments and cost sharing per 30-day supply were lower at owned pharmacies. The owned pharmacies primarily dispensed through mail order. The comparison pharmacies primarily dispensed through retail locations.

An insider looking at a specialty claim can make the comparison more specific: the drug, payer, dispensing channel, pharmacy ownership, patient payment and final adjustment. That is how a broad ownership question becomes an examination of a particular payment.

What Does 100 Percent Pass-Through Cover?

Full rebate pass-through covers the payments included in the agreement’s rebate definition. Purchasing discounts and specialty service revenue can sit outside that definition, leaving an affiliated pharmacy with income that the rebate percentage never measures.

Minnesota’s Caremark agreement effective in 2021 promises all defined rebates received by the PBM or an affiliate. The definition excludes described mail and specialty purchasing discounts and specified specialty service revenues. The percentage applies to the defined category. The exclusions decide which money enters it.

The Caremark and Employers Health Purchasing Corporation agreement in Iredell County’s procurement packet includes relevant affiliate and group purchasing organization formulary receipts, while separately excluding manufacturer services and affiliated-pharmacy purchasing discounts. Its proposed county terms also put the purchasing corporation between Caremark and the participating group for payments and allocations under the contract’s pricing commitments.

For covered federal employee and postal health plans, the Office of Personnel Management’s updated PBM transparency framework takes a broader approach to manufacturer, aggregator and group purchasing organization payments. Under that framework, the administrative fee is the PBM’s sole source of profit. Separate rules apply to contracted Part D arrangements where the sponsor bears the risk.

We look past the advertised percentage to the receipt: what the manufacturer paid for, which company received it, how the contract classified it and what reached the sponsor after reconciliation. An affiliate’s purchasing ledger can answer a question that the sponsor’s rebate report never asks.

When the Margin Leads to a False Report

A potential PBM fraud case connects the money to a false charge or report and the people who knew how it was presented. The decisive evidence can sit in a fee classification or a reconciliation workbook, beyond the initial pharmacy payment.

A former Rx Options employee brought the whistleblower case over Elixir Insurance Company’s rebate reporting, and the government joined. The government alleged that Elixir excluded retained manufacturer rebates from its annual Part D reports by calling them service fees, affecting Medicare’s payment reconciliation. Rite Aid and Elixir agreed in 2024 to a $101 million payment to resolve the allegations.

The whistleblower alleged annual misclassification of $58 million to $65 million in rebates since 2016. The complaint challenged whether the PBM, called EPS in the filing, had actually performed the services:

We see the absurdity in that allegation: fees for services nobody performed. Taxpayers funding Medicare were allegedly left to cover a bill that should have been reduced by the rebates.

An Aetna Medicare actuary brought the whistleblower case over Caremark’s cross-book pricing. The government declined to join. In its 2025 findings concerning Walgreens and Rite Aid contracts, the federal court in the Eastern District of Pennsylvania found that higher Part D payments reduced Caremark’s commercial reconciliation obligation under combined pricing commitments. The court treated those offsets as price concessions that Part D reporting had to reflect. The value moved through the reconciliation without a separate refund check.

Ownership can also connect a referral decision to dispensing revenue. In a separate whistleblower complaint involving Evzio, physicians allegedly refused to prescribe the drug until Kaleo included Patient Rx Solutions, a pharmacy they partly owned, in its network. The allegation identifies a specific bargain connecting prescriptions, network access and the owners’ pharmacy income.

These cases bring the inquiry back to decisions inside the business: the service claimed, the credit recognized, the network place exchanged for prescriptions. That is where someone who knows the transaction can add what a market-wide markup figure leaves unanswered.

What Specialty Pharmacy Insiders Can See

Health care employees see different parts of the payment. A network or contracting employee may know the participation terms, ownership relationship and decision that gave a pharmacy access. A dispensing or purchasing employee may know the supplier invoice, acquisition credit, prescription and inventory movement behind the billed drug.

Claims and reconciliation staff see the original payment, reversals, final remittance and adjustments under pricing commitments. Manufacturer-payment staff may see the service agreement, utilization invoice, receipt and allocation among companies. Plan auditors can compare those records with the sponsor’s contract and final reports. The work is connecting the same transaction across those views.

If your concern begins with a price or a margin, we examine it with you against the contract, the payment and what the business told the payer. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

When You Know Where the Money Went

If you know how specialty-pharmacy payments, affiliate receipts or reconciliation credits disappeared from the account given to a payer, speak with our whistleblower experts about that transaction. We work with you to build a case that connects the money, the reporting and the decisions behind both, and bring in PBM fraud whistleblower lawyers who understand those arrangements. We stay beside you from that first conversation through the case.