The Five Lies Behind America’s Pharmacy Benefit Managers

Timothy Lesaca MD

Psychiatrist and author draws on more than forty years of clinical practice to examine psychiatry, health-care ethics, physician well-being, and the structural forces shaping contemporary medicine.

             March 29, 2026

Executive Summary: PBMs promised to lower costs through scale and negotiation. However, the current system of rebates, vertical integration, and opaque pricing suggests that the "middleman" is no longer a neutral referee, but a powerful broker capturing margins at every stage of the supply chain.

In the American health-care economy, every new layer of bureaucracy arrives with the same promise: less waste, lower costs, better discipline. The intermediary presents itself as a kind of antiseptic—something that will clean the infection out of the system.

The pharmacy benefit manager, or PBM, was introduced to the public in exactly this spirit. PBMs would negotiate with drug manufacturers, organize pharmacy networks, and manage prescription benefits for insurers and employers. Their selling point was straightforward: scale. By representing millions of patients, PBMs could force pharmaceutical companies to offer lower prices.

That was the theory.

Today, the PBM is no longer a quiet administrative service working behind the curtain. It is one of the most powerful institutions in American medicine. Three companies—CVS Caremark, Express Scripts (owned by Cigna), and OptumRx (owned by UnitedHealth Group)—control the majority of prescription drug benefits in the United States. They decide which drugs insurance will cover, which pharmacies patients are encouraged—or required—to use, and which manufacturers receive access to millions of insured customers.

The industry still defends itself with the language of cost control and efficiency. But listen closely and you begin to hear something else: a set of claims repeated so often they have hardened into conventional wisdom. Each of them deserves a second look.

Fiction #1: PBMs lower drug prices

The PBM industry’s central argument is that it saves the system money. By negotiating rebates from drug manufacturers, PBMs claim they force pharmaceutical companies to lower prices.

But the rebate system has a strange feature: rebates are usually tied to the drug’s list price. A higher list price can produce a larger rebate. That means the system quietly rewards the inflation it claims to fight. A drug priced at $900 with a large rebate may be more attractive inside the PBM economy than a drug priced at $300 with little room for negotiation.

Meanwhile, patients often pay coinsurance or deductibles based on the list price—not the discounted one negotiated later. The rebate circulates quietly through corporate accounting. The patient pays the visible price. It is a peculiar version of savings.

Fiction #2: PBMs are neutral middlemen

The word middleman suggests neutrality. A referee. Someone who simply manages the transaction. But modern PBMs are not standing in the middle. Increasingly, they own the terrain on both sides.

CVS Health operates a PBM, a national pharmacy chain, and the insurer Aetna under the same corporate roof. UnitedHealth Group pairs OptumRx with one of the largest insurance businesses in the country. Once those pieces are integrated, the PBM is no longer merely negotiating prices. It is shaping where prescriptions are filled, how they are distributed, and which corporate channels capture the revenue.

The referee has quietly joined the game.

Fiction #3: Rebates equal savings

Rebates are the moral centerpiece of the PBM defense. They are offered as proof that someone is finally forcing pharmaceutical companies to give ground.

But rebates often function less like discounts and more like payments for market access. Manufacturers pay them to secure favorable placement on the PBM’s formulary—the list that determines which drugs insurance plans will cover. In that system, the drug offering the largest rebate can become the preferred option, even if its list price is dramatically higher than alternatives.

The discount does not correct the inflated price. It becomes part of the machinery that sustains it.

Fiction #4: Pharmacy networks are about efficiency

PBMs say they carefully manage pharmacy networks to control costs. Preferred pharmacies agree to certain reimbursement terms in exchange for access to patients.

Independent pharmacists describe a harsher reality. Many report reimbursement rates that barely cover the cost of acquiring medications. On top of that, retroactive charges—known as Direct and Indirect Remuneration (DIR) fees—can arrive months after a prescription is dispensed. For small pharmacies operating on thin margins, those fees can turn a modest profit into a loss.

Over time, the effect is predictable: fewer independent pharmacies, more consolidation, and greater reliance on large chains or PBM-affiliated dispensing channels. Efficiency is one way to describe that outcome. Market shaping might be another.

Fiction #5: The system is simply too complicated to understand

Ask PBMs why their pricing structures are opaque and the answer is usually the same: the market is complicated. And it is. Prescription drug pricing involves manufacturers, insurers, pharmacies, wholesalers, regulators, and benefit administrators.

But complexity can also be convenient.

Rebates are confidential. Contracts are sealed. Spread pricing—where a PBM charges insurers more than it pays pharmacies—can remain invisible without careful auditing. Even large employers often struggle to trace where their prescription drug spending actually goes. When the flow of money becomes impossible to follow, accountability tends to disappear with it.

The Conclusion

None of this means pharmaceutical companies are innocent. Drug manufacturers still set the initial price of medicines, and some of those prices are indefensible.

But the PBM deserves particular scrutiny because it still presents itself as the system’s disciplinarian—the institution that restrains everyone else. In reality, the PBM has become one of the most powerful brokers in the pharmaceutical economy, positioned exactly where the money flows are hardest to see and the margins are easiest to capture.

The pharmacy benefit manager was supposed to make the drug market cheaper, clearer, and more rational. Instead, it helped build a system where prices are opaque, incentives are distorted, and the middle of the supply chain has quietly become the most profitable place to stand.