The PBM contracts: what has escaped the black box

The prices you pay for drugs are set by contracts almost nobody is allowed to read. But pieces keep escaping — through congressional subpoenas, a federal investigation, state audits, and lawsuits. This page collects what escaped and what it says, in plain language. The short version: every leaked page tells the same story.

First, who signs these contracts

A PBM — pharmacy benefit manager — is the middleman your health plan hires to run its drug benefit. The PBM decides which drugs your plan covers and on what terms, negotiates discounts from drugmakers, and decides how much the pharmacy gets paid when you pick up a prescription. Three companies — CVS Caremark, Express Scripts, and Optum Rx — handle roughly 80% of US prescriptions, and each one is owned by a giant that also owns an insurer and pharmacies. (More in our community pharmacy guide.)

A PBM sits in the middle of three contracts, and each one hides a different secret:

With drugmakers: how big a rebate the manufacturer pays to get its drug covered.
With your health plan or employer: what the plan is charged for each prescription — and how much of the rebate money the PBM keeps.
With pharmacies: how much the pharmacy is actually reimbursed — which can be far less than the plan was charged.

All three are confidential. What follows is what got out anyway, channel by channel.

1. Congress read 100,000 pages of the mail

In 2021, the Senate Finance Committee finished a two-year investigation into insulin pricing, built on more than 100,000 pages of subpoenaed internal documents from the three big insulin makers and the three big PBMs. Two numbers from that report are worth memorizing:

Rebates on insulin climbed as high as roughly 70% of the sticker price. For every $100 of “list price,” up to $70 flowed backward from the manufacturer to the middlemen after the sale.
Internal Eli Lilly documents showed the company offering a small PBM a 22% rebate — and Optum Rx a 68% rebate for the same insulin. Same drug, same vial. The discount had nothing to do with the medicine and everything to do with the size of the middleman demanding it.

The report also documented manufacturers raising sticker prices specifically so they could offer bigger rebates — because the PBMs' own income was calculated as a percentage of the sticker. A lower sticker price would have cost the middlemen money, so stickers went up.

Why you should care

Your deductible and coinsurance are usually calculated on the stickerprice — the $100, not the $30 the drug really nets. The rebate machine means the people negotiating your drug prices profit when stickers rise, and you're the only one in the chain paying off the sticker.

2. The referee finally read the contracts

In 2022 the Federal Trade Commission used its subpoena power to demand the actual contracts and claims data from the six biggest PBMs and their purchasing groups. The contracts stayed confidential, but the FTC published what they do: its interim reports (2024 and 2025) found the big PBMs steering prescriptions to their own pharmacies and reimbursing those pharmacies far above cost on specialty generics — markups of hundreds to thousands of percent on some cancer and MS drugs, adding up to billions of dollars above acquisition cost over the study years.

The FTC then sued all three over insulin rebate practices. That case is now producing public outcomes: Express Scripts settled in February 2026, agreeing to overhaul its rebate model, and a proposed consent order with CVS Caremark followed. The settlement documents — public — are the closest thing yet to seeing the terms change in daylight.

3. Ohio opened the books

In 2018, Ohio's auditor did something simple and radical: compared what the state's Medicaid program was charged for each prescription against what the pharmacy was actually paid for it. The gap — called spread pricing — was money the PBMs kept, and it came to about $224 million in a single year, roughly 31% of everything the state spent on generics. Kentucky ran the same exercise in 2019 (“Opening the Black Box”) and found the same machine.

What happened next matters more: both states fired the arrangement. Ohio hired one PBM (Gainwell) and Kentucky hired one (MedImpact) under contracts that are public records — flat fee per prescription, every discount passed through, full audit rights. Louisiana and Mississippi followed.

The boring contract that proves the point

A transparent PBM contract is not hypothetical — you can read Ohio's. It pays the middleman a flat fee for work performed, like any other vendor. The fact that the industry's standard contract looks nothing like that is the clearest evidence of what the standard contract is for. Our spread trackerruns Ohio's arithmetic nationally, every quarter.

4. Lawsuits leak fragments

Court records keep prying out pieces. Opinions in the EpiPen litigation quoted the rebate percentages Mylan paid PBMs for formulary position. State attorneys general keep filing insulin and spread cases, each unsealing a little more. And in 2024, a Johnson & Johnson employee sued her own employer for what its PBM contract produced: the plan paid roughly $10,000 for a generic multiple-sclerosis pill that cash-price pharmacies sold for about $30. The suit's deeper point: even the employer buying the coverage often can't see or audit the prices in its own contract.

5. Public customers leave public paperwork

Whenever a PBM serves a government client — a state employee plan, the military's TRICARE benefit, a county — the contract becomes a public record, at least in redacted form. The rates are usually blacked out, but the structureisn't: discount guarantees pegged to a made-up sticker benchmark (AWP), rebate guarantees per prescription, and tight limits on the client's right to audit. Reading the skeleton tells you how the game is designed even when the numbers are hidden.

What's still secret

The commercial contracts covering most working-age Americans remain fully confidential — especially the pharmacy-side price lists (MAC lists) and the specialty-pharmacy routing rules that decide which drugs must be filled at the PBM's own pharmacy. A federal law passed in early 2026 requires PBMs to show rebate contracts to their plan clients and pass rebates through — disclosure to clients, not to the public, but every widening of the circle has historically meant more pages escaping.

The big takeaway

Every escaped page says the same thing

The middlemen are paid as a percentage of the sticker price— so everyone upstream of you profits when stickers rise, and the contracts are confidential precisely because the gaps between prices are the product. This isn't a system failing; it's a system working exactly as designed. The design is just secret. And the escaped documents prove the alternative exists: when Ohio made the contract public and the fee flat, the machine's $224-million-a-year cut simply stopped.

See it in our data

The spread tracker— the Ohio audit's arithmetic, run nationally every quarter.
The specialty definitions matrix— who decides a drug is “specialty,” and where that routes the money.
The Big Picture — the rebate black box, sized and labeled as the estimate it is.
Rebates and the gross-to-net gap — the mechanics behind the 70% number.

Sources: Senate Finance Committee insulin investigation (2021); FTC 6(b) interim reports on PBMs (2024, 2025) and FTC v. Express Scripts/Caremark/Optum Rx settlements (2026); Ohio Auditor of State PBM report (2018); Kentucky Medicaid “Opening the Black Box” (2019); Lewandowski v. Johnson & Johnson (D.N.J., 2024); state procurement records for Ohio's and Kentucky's single-PBM contracts.