A new survey commissioned by Evernorth reveals a significant consensus among employers regarding the future of prescription drug benefits, with over 90% agreeing that a rebate-free approach would lead to clearer understanding and improved transparency in drug pricing. This finding, based on a poll of 300 employers with at least 1,000 workers, underscores a growing demand for reform within the complex pharmaceutical supply chain, specifically targeting the role of Pharmacy Benefit Managers (PBMs) and their controversial rebate practices.
The survey, published on May 13, 2026, highlights that 87% of respondents believe a rebate-free model better aligns with their organization’s needs, while 86% anticipate that such a system would enhance the predictability of pharmacy spending. These figures reflect a broad desire among employers to gain better control over the escalating costs of prescription drugs, which continue to be a major component of employee healthcare benefits. Ashley Holzworth-Nash, vice president of retail network product strategy and solutions at Evernorth, affirmed this sentiment, stating, "This data confirms employers want pharmacy benefits that are easier to understand, easier to budget for, and designed around the experience of the people they cover."
The Intricate Role of Pharmacy Benefit Managers and the Rebate System
Pharmacy Benefit Managers (PBMs) operate as crucial intermediaries in the intricate drug supply chain, managing prescription drug benefits on behalf of various payers, including employers, health plans, and government programs. Their primary functions encompass negotiating rebates from pharmaceutical manufacturers, developing and maintaining medication formularies (lists of covered drugs), and contracting with pharmacies to establish drug prices. While PBMs assert that their activities help to lower drug costs for consumers and payers through bulk purchasing and negotiation, their business practices have increasingly come under intense scrutiny from regulators, lawmakers, and patient advocacy groups.
The core of this controversy lies in the rebate system. Manufacturers offer rebates to PBMs in exchange for favorable formulary placement or preferred status for their drugs. Critics argue that this system, far from reducing costs, often incentivizes PBMs to favor more expensive drugs that carry higher rebates, rather than more affordable alternatives. This creates an opaque pricing structure where the list price of a drug can be significantly different from its net cost, and the benefits of these rebates are not always fully passed on to employers or, more importantly, to patients at the point of sale. The lack of transparency in how these rebates are calculated, retained, and applied has led to accusations that PBMs contribute to, rather than alleviate, the high cost of medications.
A Chronology of Mounting Pressure and Reform Efforts
The call for PBM reform is not new, but it has gained considerable momentum in recent years, manifesting in a series of legislative actions, regulatory investigations, and shifts within the industry itself.
- Early 2020s: Growing Public and Political Awareness: Concerns over high drug prices and the opaque nature of PBM operations began to intensify, fueled by media reports, patient testimonials, and academic research highlighting the disconnect between list prices and net costs. Lawmakers at both federal and state levels started exploring various legislative avenues to introduce greater transparency and accountability.
- 2024: Federal Trade Commission (FTC) Scrutiny: A landmark moment occurred when the Federal Trade Commission (FTC) initiated legal action against the nation’s largest PBMs – UnitedHealth’s Optum Rx, CVS’s Caremark, and Cigna’s Express Scripts. The lawsuit alleged that these PBMs engaged in practices that steered patients toward more expensive insulin products, ostensibly to secure higher rebates. This action signaled a serious intent by federal regulators to challenge anti-competitive practices and lack of transparency within the PBM industry.
- Early 2026: Congressional Action on PBM Reforms: Building on the regulatory pressure, President Donald Trump signed a funding bill into law that included several significant PBM reforms. Key provisions of this legislation included enhanced transparency requirements for PBMs operating within Medicare Part D and, critically, a prohibition on PBMs linking their compensation to manufacturers’ list prices. This move aimed to dismantle a key incentive structure that critics argued encouraged PBMs to favor high-list-price drugs.
- Early 2026: Express Scripts’ Settlement and Strategic Shift: In response to the FTC lawsuit, Express Scripts reached a settlement earlier this year. As part of the agreement, the PBM committed to no longer prioritizing drugs with high list prices on its standard formularies. Furthermore, it agreed to delink its compensation from the savings it negotiates with drugmakers. Even prior to the settlement, Express Scripts had begun signaling a strategic pivot, announcing in October 2025 its intention to transition towards a rebate-free model for its clients. This proactive shift demonstrated an industry acknowledgment of the demand for change.
- May 2026: Optum Rx’s New Model: Following the trend set by Express Scripts and in line with the broader industry pressure, Optum Rx, another major PBM, announced its own new model. This approach involves clients paying monthly fees that are explicitly not tied to manufacturers’ list prices or prescription volume. This move further solidifies the industry’s shift away from traditional rebate-driven compensation structures towards more transparent, fee-for-service models.
Supporting Data: The Financial Landscape of Drug Spending
The concerns voiced by employers are rooted in the substantial and ever-increasing financial burden of prescription drugs. According to various healthcare expenditure reports, pharmaceutical spending continues to represent a significant portion of overall healthcare costs for businesses and individuals.
- Overall Drug Spending: In recent years, annual drug spending in the U.S. has consistently exceeded hundreds of billions of dollars, with projections indicating continued growth. For instance, data from the Centers for Medicare & Medicaid Services (CMS) has shown prescription drug spending growing at rates that often outpace overall healthcare inflation.
- Employer Burden: Employers, who provide health insurance for a majority of privately insured Americans, bear a substantial portion of these costs. A typical large employer might spend tens of millions, if not hundreds of millions, annually on prescription drug benefits. The unpredictability of these costs, exacerbated by the opaque rebate system, makes long-term financial planning challenging and can impact wages and other employee benefits.
- Rebate Value: While exact figures are often proprietary, estimates suggest that the total value of rebates in the U.S. pharmaceutical market is in the tens of billions of dollars annually. The dispute often centers on how much of these rebates are passed through to the ultimate payers (employers/patients) versus how much is retained by PBMs.
- Market Concentration: The PBM industry is highly concentrated, with the three largest players – Optum Rx (UnitedHealth Group), CVS Caremark (CVS Health), and Express Scripts (Cigna/Evernorth) – controlling a vast majority, estimated to be 75-80%, of the market. This market dominance has raised anti-trust concerns and intensified calls for regulatory oversight, as limited competition can stifle innovation and maintain opaque practices.
Official Responses and Industry Shifts
The shift towards rebate-free and fee-based models by major PBMs like Express Scripts and Optum Rx represents a significant, albeit reactive, evolution within the industry. While PBMs have historically defended their traditional models as essential for negotiating discounts, the sustained pressure from regulators, lawmakers, and now, emphatically, from employers, has evidently forced a reevaluation of their business practices.
- PBM Justifications: Historically, PBMs have argued that rebates are confidential business arrangements that allow them to secure significant discounts from manufacturers, which are then passed on to clients. They claim that dismantling the rebate system entirely could lead to higher list prices and ultimately increase costs for consumers if manufacturers do not lower their prices in response.
- Employer Demand for Simplicity: The Evernorth survey, however, clearly indicates that employers prioritize simplicity and predictability over the perceived, but often untraceable, benefits of the traditional rebate system. The complexity of current pharmacy benefit designs often leaves employers uncertain about the true net cost of drugs and their actual savings.
- Governmental Stance: The actions by the FTC and Congress underscore a governmental belief that current PBM practices contribute to market distortions and lack of transparency. The emphasis on delinking PBM compensation from list prices and mandating greater transparency points to a policy goal of aligning PBM incentives more closely with cost reduction for patients and payers.
Broader Impact and Implications
The growing preference for rebate-free models and the ongoing shifts in PBM strategies carry significant implications for various stakeholders across the healthcare ecosystem.
- For Employers: A move towards rebate-free or fee-based models promises greater financial predictability and transparency, allowing employers to budget more effectively for their healthcare expenditures. It could also simplify benefits administration and potentially lead to more direct and honest conversations with PBMs about actual costs. This shift empowers employers to demand clearer value propositions from their PBM partners.
- For Employees/Patients: The ultimate goal of these reforms is to reduce out-of-pocket costs for patients. If rebates are removed from the equation and PBMs are compensated via transparent fees, the argument is that manufacturers will be pressured to lower list prices, and the true cost of drugs will be more evident. This could translate into lower co-pays, deductibles, and overall prescription expenses for individuals, improving access to necessary medications. However, careful monitoring will be required to ensure that PBMs do not simply shift their revenue streams without genuinely impacting patient costs.
- For Pharmaceutical Manufacturers: A rebate-free environment could fundamentally alter manufacturers’ pricing strategies. Without the incentive of offering large rebates for formulary placement, manufacturers might be compelled to set more competitive and transparent list prices from the outset. This could lead to a more competitive market based on true drug value rather than rebate potential.
- For PBMs: The industry is clearly at an inflection point. PBMs will need to adapt their business models, focusing on providing value through efficient claims processing, robust clinical programs, and genuinely effective cost management strategies rather than relying on opaque rebate negotiations. The shift to fee-based models could foster greater competition among PBMs based on service quality and transparent pricing.
- For the Healthcare System: These reforms could contribute to a broader push for greater transparency across the entire healthcare system. By shedding light on one of the most opaque corners of healthcare spending, there is potential to build trust and create a more efficient and patient-centric drug supply chain. However, the transition will likely be complex, requiring ongoing regulatory oversight and vigilance to ensure that new models genuinely deliver on their promise of lower costs and greater clarity. The long-term success will hinge on whether these changes translate into tangible savings for patients and employers, and if they foster a more competitive and ethical pharmaceutical market.
The overwhelming employer sentiment captured by the Evernorth survey, coupled with decisive regulatory action and strategic shifts by leading PBMs, signals a significant turning point in the battle for prescription drug price transparency and affordability. The coming years will reveal whether these foundational changes lead to a more equitable and predictable drug pricing landscape for all stakeholders.
