Incentives Drive Behavior: Make Sure Your PBM is Working For You, Not Against You

“Show me the incentives and I will show you the outcome.”
—Charlie Munger, Vice Chairman, Berkshire Hathaway

In business, and especially in pharmacy benefit management, incentives aren’t just a side detail. They are everything. The way a pharmacy benefit manager (PBM) makes money directly impacts how it behaves, the decisions it makes on your behalf, and ultimately, how much you pay and what kind of care your members receive.

Why Pharmacy Benefit Incentives Matter More Than Ever

Managing pharmacy benefits is no longer a simple “set it and forget it” task. With ultra-high-cost therapies in market, and new benefit solutions emerging rapidly, employers face mounting pressure to act quickly and wisely.

There’s too much at stake to use a wait and see strategy. That’s why more employers are turning to their pharmacy partners to make high-impact decisions for them, often without full visibility into how those recommendations are made.

But here’s the catch, if your PBM is financially rewarded for not containing costs, or for pushing specific drugs based on hidden incentives, how confident are you that they’re acting in your best interest?

Follow the Money

If you want to understand your PBM’s behavior, look at how it gets paid. Some PBMs earn revenue in ways that often conflict with employer goals like lowering costs, improving member experience, and supporting better health outcomes. Here are two of the most common misaligned revenue sources:

The Spread

One of the most entrenched revenue streams for traditional PBMs is spread pricing, the difference between what they pay the pharmacy and what they bill you. Even in so-called “pass-through” contracts, this margin often persists through complex pricing strategies that disguise profit while claiming transparency.

Why it matters: When a PBM earns a percentage of your total spend, higher costs equal higher revenue. If your spend jumps from $10M to $15M, and the PBM takes a 20% cut, their income goes from $2M to $3M, without delivering any extra value to you. That creates a powerful disincentive to reduce your spend.

Rebates

Rebates are payments from drug manufacturers to PBMs, often tied to steering volume toward specific medications. While they can lead to lower list prices, they don’t always translate to lower net costs for employers.

Why it matters: A PBM that profits from rebates has a strong incentive to favor higher-rebate drugs—even if they’re not the most cost-effective or clinically appropriate option. This can drive up your total pharmacy spend, distort your formulary, and lead to poor member outcomes.

That’s why it’s critical to work with a pharmacy partner that prioritizes lowest net cost, not highest rebate. When your PBM is focused solely on optimizing rebates, they may ignore better alternatives, such as generics, biosimilars, or lower-cost branded therapies that could offer the same or better clinical value at a significantly lower cost to you and your members.

Rethink What You Should Expect from a PBM

Incentives shape behavior. Always have, always will. If your PBM profits when your costs rise, you’re playing a rigged game.

SlateRx’s model is simple, transparent, and intentionally designed to eliminate conflicts of interest:

• No spread pricing. You pay exactly what the drug costs. No markups.
• 100% pass-through of all money from all sources. We don’t keep a dime of the money that is passed back to you.
• Single, fixed PMPM fee with performance guarantees. You know what you’re paying and our fee is at risk unless we hit pre-agreed outcomes.

This alignment frees us to make decisions that are in your best interest—not ours.