That lack of visibility into how pharmacy benefits are administered isn’t just frustrating – it’s expensive. Especially for hospitals with tight margins and a mission to serve their communities.
The time is now to start asking harder questions, demanding clearer answers, and holding your pharmacy benefits administrator accountable.
The Real Cost of Opaque Pharmacy Administration Practices
The way traditional Pharmacy Benefit Managers (PBMs) make money isn’t obvious, but it adds up fast.
In January 2025, the Federal Trade Commission published a Second Interim Staff Report which found that the three largest PBMs, Caremark Rx, LLC (CVS), Express Scripts, Inc. (ESI), and OptumRx, Inc. (OptumRx), imposed markups of hundreds and thousands of percent on numerous specialty generic drugs dispensed at their affiliated pharmacies – including drugs used to treat cancer, HIV, and other serious diseases and conditions.
According to the report, “Such significant markups allowed the Big 3 PBMs and their affiliated specialty pharmacies to generate more than $7.3 billion in revenue from dispensing drugs in excess of the drugs’ estimated acquisition costs from 2017-2022.”
For hospitals already operating on razor-thin margins, these hidden costs are more than a nuisance – they can undermine staffing, patient programs, and even financial viability.
How Transparency Helps Hospitals
Transparency isn’t just a nice-to-have – it’s a chance to regain control over one of your biggest, fastest-growing expenses.
When hospitals have clear data about drug costs, rebate flows, and pharmacy administration fees, they can:
- Pinpoint where dollars are being wasted.
- Hold vendors accountable for delivering on their promises.
- Align spending decisions with their mission and community values.
It’s also about credibility. When you can show your board, staff, and patients that you’re managing pharmacy dollars responsibly, you strengthen trust both inside and outside your organization.
What Transparency Looks Like
So, what does a transparent pharmacy program entail? A few things to look for:
- Fee-only or pass-through contracts – instead of the administrator profiting from markups, they charge a flat fee and pass all savings back to you.
- Regular, detailed reporting that shows exactly where your money is going and what rebates you’re receiving.
- Full disclosure of contracts with manufacturers and pharmacies, so you’re not left guessing.
- A partner that prioritizes patient care and hospital sustainability over hidden profits.
Why Now?
Drug prices aren’t slowing down. In 2023 alone, U.S. prescription drug spending jumped 11.4% to nearly $450 billion.
The Big Three PBMs control about 80% of all U.S. prescriptions, giving them enormous leverage. At the same time, hospitals are under more pressure than ever to justify every dollar they spend – and boards, donors, and patients are paying attention. With transparent alternatives now widely available, continuing with the status quo is harder to defend.
What Hospitals Can Do Today
You don’t have to overhaul everything overnight. But you can take a few smart first steps:
- Pull out your pharmacy benefits contract and look for vague language, spread pricing, or retained rebates.
- Start asking questions like: Do we get 100% of the rebates? How exactly are you paid?
- Explore alternative pharmacy benefit partners that offer fee-only, pass-through contracts and detailed reporting.
- Work with an advisor who knows how to spot red flags and negotiate better terms.
Even a conversation with the right partner can uncover savings and accountability you didn’t know you were missing.
The bottom line
Hospitals shouldn’t have to sacrifice care or cut programs to keep up with rising drug costs. By demanding transparency from your pharmacy benefits administrator, you can better manage your budget, strengthen your mission, and invest more where it counts – in your patients and your community.
It starts with asking better questions and demanding better answers. When you’re ready to take that step, the right partner can help you see where your dollars are going – and how to bring them back under your control.