What is a PBM?
Between the company that makes your medication and the counter where you pick it up sits a company you have probably never heard of, which decided whether the drug is covered, what you pay, and sometimes which pharmacy you may use. Six stops through what pharmacy benefit managers are and how they work — every fact from a government document, a regulator's action, or the company's own statement.
Read this first, because it changes the weight of what follows. The most-cited documents here — the FTC's two PBM reports — are interim staff reports from a study still underway: staff findings, not adjudicated facts, released on a 4-1 vote with one commissioner dissenting, and the subject of a lawsuit by Express Scripts demanding retraction. Settlements cited below were entered without admissions of fault. The PBMs' rebuttals get their own stop, because some of them are backed by government evidence too. A dollar flow is a fact, not a verdict.
Stop 1
The middleman you've never heard of
What is a pharmacy benefit manager?
When you fill a prescription, your insurer almost never handles the drug part itself. It hires a pharmacy benefit manager — a PBM — to decide which drugs are covered, negotiate prices with manufacturers, build the pharmacy network, and process the claim at the counter. PBMs touch nearly every US prescription, and most people have never heard of them.
The three largest PBMs — CVS Caremark, Express Scripts, and OptumRx — processed nearly 80% of the roughly 6.6 billion prescriptions dispensed by US pharmacies in 2023; the six largest processed more than 90%.
Source: Federal Trade Commission — Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies — interim staff report (2024-07-09). An interim staff report from an ongoing 6(b) study — staff findings, not an adjudicated Commission ruling; one commissioner dissented from its release.
The FTC's study covers the six largest PBMs by name: Caremark Rx (CVS Health), Express Scripts (Cigna), OptumRx (UnitedHealth Group), Humana Pharmacy Solutions, Prime Therapeutics, and MedImpact Healthcare Systems.
Source: Federal Trade Commission — 6(b) special orders to the six largest PBMs, issued 2022; named in the July 2024 interim report (2024-07-09).
Why this stop matters: Whoever controls the formulary controls which version of a medication you get, what you pay at the counter, and sometimes which pharmacy you're allowed to use.
Stop 2
Each big PBM is owned by an insurer — and owns pharmacies
Who do PBMs actually work for?
The big three PBMs are not independent brokers. Each sits inside a healthcare conglomerate that also owns a major insurer and its own pharmacies: CVS Health owns Caremark, the insurer Aetna, and CVS pharmacies; Cigna owns Express Scripts and mail-order/specialty pharmacies; UnitedHealth Group owns OptumRx and Optum pharmacies. A PBM can therefore steer prescriptions toward pharmacies its own parent owns.
Pharmacies affiliated with the three largest PBMs accounted for nearly 70% of US specialty drug revenue, per the FTC's first interim report.
Source: Federal Trade Commission — Interim staff report on PBMs (2024-07-09). Interim staff report; see interimRule.
The big three's affiliated pharmacies took 68% of the specialty-drug dispensing revenue they analyzed in 2023, up from 54% in 2016 — the steering trend the FTC's second report documents.
Source: Federal Trade Commission — Specialty Generic Drugs: A Growing Profit Center for Vertically Integrated Pharmacy Benefit Managers — second interim staff report (2025-01-14). Interim staff report; see interimRule.
Why this stop matters: Vertical integration is the reason every later stop is contested: when the referee owns one of the teams, every call it makes gets a second look.
Stop 3
Three ways the money is made
How does a PBM earn revenue?
Three main channels. Rebates: manufacturers pay the PBM for a good spot on the formulary — the big three now route these through their own group purchasing organizations (CVS's Zinc, Express Scripts' Ascent — based in Switzerland, Optum's Emisar). Spread pricing: the PBM bills your health plan more for a drug than it pays the pharmacy and keeps the difference. Pharmacy economics: reimburse its own pharmacies generously, others less so, and mark up what its own pharmacies dispense.
Ohio's state auditor found PBMs charged Ohio Medicaid managed-care plans $224.8 million more than they paid pharmacies in one year (April 2017–March 2018) — 8.9% of gross drug cost overall, and a 31.4% spread on generic drugs.
Source: Ohio Auditor of State — Ohio's Medicaid Managed Care Pharmacy Services report (2018-08-16).
The FTC's second interim report found the big three's affiliated pharmacies collected more than $7.3 billion in dispensing revenue above estimated drug acquisition cost on specialty generics over 2017–2022, with markups on some drugs of hundreds or thousands of percent, plus an estimated $1.4 billion of spread-pricing income on the drugs analyzed.
Source: Federal Trade Commission — Second interim staff report on PBMs (2025-01-14). Interim staff report; see interimRule.
The other side of the ledger: in Medicare Part D, the GAO found PBMs passed through 99%+ of manufacturer rebates to plan sponsors in 2016 (retaining under 1%), earning their money instead through claim-volume and per-member fees. Rebate retention is not the same in every market.
Source: US Government Accountability Office — Medicare Part D: Use of Pharmacy Benefit Managers and Efforts to Manage Drug Expenditures and Utilization (GAO-19-498) (2019-07-15).
Why this stop matters: None of these revenue streams appears on your receipt. Whether each one nets out as savings or markup for you depends on the market, the contract, and the drug — which is why the evidence is fought over line by line.
Stop 4
What regulators say it does to drug prices
Does any of this change what you pay?
Two mechanisms worry regulators. First, rebate chasing can favor a drug with a high list price and a big rebate over an identical drug with a low list price — and patients whose cost-sharing is tied to list price pay the inflated number. That is the core of the FTC's insulin case. Second, spread and markups are invisible costs that end up in premiums and public budgets. States have already extracted large settlements over Medicaid billing — entered without admissions of fault.
In September 2024 the FTC filed an administrative complaint against Caremark, Express Scripts, OptumRx and their GPOs, alleging their rebate practices artificially inflated insulin list prices and shifted costs to vulnerable patients.
Source: Federal Trade Commission — FTC Sues Prescription Drug Middlemen for Artificially Inflating Insulin Drug Prices (2024-09-20). A complaint is an allegation, not a finding.
In February 2026, Express Scripts settled the FTC's insulin case, agreeing to stop preferring higher-list-price drugs on standard formularies when cheaper equivalents exist, to delink its pay from negotiated savings, and to offer plans patient cost-sharing based on net rather than list price. As of this page's verification date, a CVS Caremark settlement was pending Commission review and the OptumRx matter was unresolved.
Source: Federal Trade Commission — In the Matter of Caremark Rx, Zinc Health Services, et al. (insulin); Express Scripts settlement announced February 2026 (2026-02-04). A settlement resolves claims without adjudicating them; Express Scripts admitted no wrongdoing.
Centene, whose PBM subsidiary managed Medicaid drug benefits in many states, reached no-fault settlements over pharmacy billing beginning with Ohio ($88.3 million) and Mississippi in June 2021, and set aside $1.1 billion for similar claims by other states.
Source: Centene Corporation (Form 8-K) / Ohio Attorney General — Centene 8-K of June 14, 2021 announcing no-fault agreements and reserve (2021-06-14). No-fault settlements; Centene denied wrongdoing.
In the FTC's survey work, nearly 30% of Americans reported rationing or skipping doses of prescribed medication because of cost.
Source: Federal Trade Commission — Interim staff report on PBMs (2024-07-09). Survey figure quoted in an interim staff report; it measures cost pressure generally, not PBM causation.
Why this stop matters: The mechanism — cost-sharing computed on a list price nobody actually pays — is the single most concrete way a middleman's incentive can reach your wallet.
Stop 5
The PBMs' answer
What do the PBMs say back?
The industry's defense is serious and partly supported by government evidence: someone has to negotiate against manufacturer list prices, and PBM scale is what extracts discounts. Express Scripts went further — it sued the FTC over the first report. And the GAO's Part D work found PBMs passing essentially all rebates through. The honest summary: rebate pass-through looks clean where it has been federally audited; the fights are over commercial contracts, affiliated pharmacies, and spread.
In September 2024 Express Scripts sued the FTC, calling the interim report 'unfair, biased, erroneous, and defamatory' and demanding its retraction, saying the agency ignored millions of documents the PBMs produced and leaned on unverifiable public comments.
Source: Express Scripts / Evernorth (company's own statement) — Express Scripts Sues FTC, Demands Withdrawal of PBM Report (2024-09-17). The company's own characterization of its suit.
FTC Commissioner Melissa Holyoak dissented from releasing the first interim report; the Commission's vote was 4-1, and two commissioners issued separate statements — disagreement about the report's rigor exists inside the agency itself.
Source: Federal Trade Commission — Press release and commissioner statements accompanying the interim staff report (2024-07-09).
The strongest pro-PBM government evidence: GAO's Medicare Part D review found PBMs retained less than 1% of rebates in 2016, passing the rest to plan sponsors, which sponsors used to hold down premiums.
Source: US Government Accountability Office — GAO-19-498 (2019-07-15).
Why this stop matters: If you only read the FTC's framing you'd convict; if you only read the industry's you'd acquit. The documents support neither verdict — they support specific, market-by-market findings.
Stop 6
What this means at the pharmacy counter
What can you actually do with this?
Most psychiatric medications are generics that cost pennies to make — which is exactly the category where the Ohio audit found the biggest spreads and where cash prices sometimes beat insurance copays. Three usable facts: your copay is set by formulary tier, not by what the drug costs; a pharmacy can tell you the cash price if you ask (gag clauses on pharmacists were banned federally in 2018); and if a covered drug is suddenly excluded or switched, that is a formulary decision someone made — you can ask your plan who made it and appeal it.
Federal law has banned 'gag clauses' — contract terms preventing pharmacists from volunteering that the cash price is lower than the insurance copay — since October 2018.
Source: US Congress — Patient Right to Know Drug Prices Act (S.2554, Public Law 115-263) and Know the Lowest Price Act (S.2553, Public Law 115-262) (2018-10-10).
The Ohio audit's 31.4% spread was on generic drugs specifically — the category covering sertraline, fluoxetine, bupropion and most other psychiatric prescriptions.
Source: Ohio Auditor of State — Ohio's Medicaid Managed Care Pharmacy Services report (2018-08-16).
Why this stop matters: You cannot renegotiate a rebate contract, but you can ask one question at the counter — 'what's the cash price?' — and one question of your plan — 'who excluded this drug, and how do I appeal?' Both are questions the system is legally required to answer.
Where the money starts
PBMs are the middle of the pipe. The start of it — what the manufacturers themselves earn and spend, drug by psychiatric drug, from their own audited filings — is at how pharma makes and spends money, and the rest of the trail (payments to doctors, CME, nonprofits, the news) is on the library's follow-the-money shelf.
Method, in full
Six stops, each anchored to government documents, regulator or court actions, or the companies' own statements. Built to be lifted into an in-app trail: stops are ordered, self-contained, and each carries its own sources. The FTC's two PBM reports are INTERIM STAFF REPORTS from an ongoing study under Section 6(b) of the FTC Act — staff findings, not adjudicated facts and not a Commission ruling. The Commission voted 4-1 to release the first report, with Commissioner Melissa Holyoak dissenting. Express Scripts has sued the FTC calling the first report biased and defamatory. Every stop that cites these reports says what they are. PBMs' rebuttals are acknowledged where substantive: Express Scripts' suit against the FTC, the GAO's finding that PBMs passed through nearly all Medicare Part D rebates, and the industry position that PBM negotiation is the main counterweight to manufacturer list prices. A markup, a spread, or a settlement is a fact about how money moved, not a verdict on any company's legality or morality. Settlements cited here were entered without admissions of fault, and the page says so. No advocacy-organization sourcing. Every figure traces to a government document, a regulator or court action, or the company's own published statement. Verified 2026-09-02. Sources: Federal Trade Commission, Government Accountability Office, Ohio Auditor of State, Ohio Attorney General, US House Committee on Oversight and Accountability, and the companies' own statements and SEC filings.