By Emily Olsen, Healthcare Dive
Published May 13, 2026
The landscape of American healthcare is undergoing a seismic shift. For decades, the pharmacy benefit manager (PBM) industry has operated behind a veil of complex financial incentives, primarily centered around the "rebate" system. However, a new consensus is emerging among the nation’s largest employers: the current model is broken, and it is time for a radical departure toward transparency.
According to a new industry survey conducted for Evernorth, an overwhelming 90% of employers now agree that a rebate-free approach to pharmacy benefits is not only easier to understand but essential for improving price transparency. As scrutiny from federal regulators and political leaders reaches a fever pitch, corporate America is signaling that it is ready to trade the opaque, incentive-laden structures of the past for a more predictable, fee-based future.
Main Facts: The Rebate Dilemma
To understand the shift, one must first understand the traditional PBM role. PBMs act as the powerful intermediaries between drug manufacturers, insurance companies, and pharmacies. Their primary functions include negotiating rebates—discounts paid by drugmakers to PBMs—creating formularies (lists of covered drugs), and managing pharmacy networks.
The core of the controversy lies in the "spread" and the rebate mechanism. Critics have long argued that PBMs are incentivized to favor higher-list-price drugs because they often retain a percentage of the negotiated rebates. This creates a perverse incentive: the more expensive the drug, the larger the rebate, and potentially, the higher the profit for the middleman.
The survey of 300 employers, each representing at least 1,000 workers, highlights that this system has alienated those footing the bill. The findings are clear:
- 90% of employers believe a rebate-free model improves transparency.
- 87% of respondents stated that a rebate-free approach better aligns with their organizational needs.
- 86% of employers explicitly noted that moving away from rebates would improve the predictability of their pharmacy spending.
Chronology of Reform and Regulatory Pressure
The transition away from the rebate model is not occurring in a vacuum. It is the result of years of mounting pressure from both the legal system and the federal government.
- 2024: The Federal Trade Commission (FTC) took unprecedented action by suing the "Big Three" PBMs—UnitedHealth’s Optum Rx, CVS Caremark, and Cigna’s Express Scripts. The lawsuit alleged that these entities engaged in anti-competitive behavior by steering patients toward high-cost insulin products to secure higher rebates.
- October 2025: Sensing the shifting winds, Express Scripts announced a major pivot, declaring its intention to transition to a fully rebate-free model, marking a significant departure from its historical business practices.
- Early 2026: The political landscape shifted dramatically when President Donald Trump signed landmark legislation aimed at PBM reform. The bill introduced stringent transparency requirements and, crucially, prohibited PBMs from linking their compensation to manufacturers’ list prices within Medicare Part D.
- Spring 2026: Express Scripts reached a historic settlement with the FTC, agreeing to cease the practice of preferring drugs with inflated list prices and committing to delinking its compensation from the savings it negotiates.
- May 2026: Following the industry trend, Optum Rx announced a new, fee-based pharmacy benefits model. This model ensures that clients pay predictable monthly fees, completely decoupling the PBM’s revenue from prescription volume or manufacturer list prices.
Supporting Data: Why Employers are Changing Course
The data suggests that employers are no longer willing to accept the "black box" of PBM contracting. For years, HR departments and benefits managers have struggled to budget for pharmacy costs because the true net cost of a medication was obscured by manufacturer rebates, administrative fees, and complex spread-pricing arrangements.
"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," said Ashley Holzworth-Nash, vice president of retail network product strategy and solutions at Evernorth.
The financial data reinforces this. When PBMs operate on a fee-based model, the cost to the employer becomes fixed and transparent. In contrast, the rebate model introduces volatility; if a manufacturer changes a rebate agreement, or if a drug moves from one tier to another, the employer’s bottom line can fluctuate unpredictably. By moving to a model where the PBM is paid a transparent, flat fee for administrative services, employers can finally gain the cost certainty they have been craving since the early 2010s.
Official Responses and Strategic Shifts
The industry’s largest players are now scrambling to rebrand themselves as partners in transparency. The shift from a rebate-reliant revenue stream to a fee-based service model is a fundamental transformation of the PBM business model.
The PBM Perspective
Industry leaders, once defensive, are now adopting the language of the reformers. Express Scripts’ move to a "cost-plus" style model was a watershed moment. By removing the financial incentive to prioritize expensive drugs, the PBM is attempting to mitigate the legal and reputational risks that triggered the 2024 FTC lawsuit.
Optum Rx’s recent announcement echoes this sentiment. By explicitly stating that their fees will no longer be linked to "list prices or prescription volume," they are effectively removing the conflict of interest that critics have cited for nearly a decade.
The Employer Perspective
For HR leaders, this is a victory for administrative simplicity. Managing a health plan with dozens of rebates requires high-level data analysis and constant auditing. A rebate-free, fee-based model simplifies the accounting process, reduces the burden on benefits departments, and ultimately leads to lower premiums for employees.
Implications: What This Means for the Future of Healthcare
The move toward transparency will have profound, long-term implications for the healthcare ecosystem:
1. The Death of the "List Price" Game
As PBMs move away from linking their pay to manufacturer list prices, the incentive for drugmakers to artificially inflate those prices to satisfy PBM rebate demands will diminish. This could lead to a more stabilized drug pricing environment where the "sticker price" of a medication reflects its actual value rather than a marketing negotiation point.
2. Regulatory Oversight Will Intensify
Even with these voluntary shifts, regulators are unlikely to pull back. The FTC and legislative bodies have tasted success in curbing PBM influence. Future policy will likely focus on ensuring that "rebate-free" models don’t simply replace old distortions with new, hidden fees. Expect to see continued legislative focus on audit rights, ensuring that employers have full visibility into the pass-through costs of pharmacy benefits.
3. Patient Experience and Access
Perhaps the most important implication is the impact on the patient. Under the old rebate-heavy system, patients were often steered toward expensive, branded drugs because the PBM received a higher rebate for them, even if a cheaper, generic alternative was equally effective. In a fee-based, transparent model, the PBM’s incentive is to manage the total cost of care efficiently. This should, in theory, lead to better formulary design—where the most cost-effective and clinically appropriate drugs are prioritized, ultimately reducing out-of-pocket costs for the average employee.
4. A More Competitive Market
The shift to fee-based models allows for easier "apples-to-apples" comparisons between PBMs. When transparency is the default, employers can easily compare administrative fees across different vendors. This will likely spark a new wave of competition, as PBMs must now compete on the quality of their clinical management and the efficiency of their administrative services, rather than their ability to "game" the rebate system.
Conclusion
The evidence presented in the Evernorth-commissioned survey is a clear indicator that the PBM industry is at a crossroads. The era of the "rebate-driven" middleman is fading, replaced by a push for clarity, simplicity, and accountability. While the legal and regulatory battles of the past two years served as the catalyst, it is the collective demand of American employers that will ultimately cement this change. As the industry moves toward a more transparent, fee-based future, the hope is that the focus of pharmacy benefits will finally return to where it belongs: the health and well-being of the patient.
