The FTC found that the six largest PBMs manage more than 90% of U.S. prescriptions, while the three largest processed nearly 80% of roughly 6.6 billion prescriptions in 2023. It has also documented self-preferencing, opaque reimbursement and rebate arrangements that can restrict lower-cost alternatives. (Federal Trade Commission) Surely there is a better way.

My proposed model: Transparent Net Price, or TNP

Instead of:

Manufacturer → wholesaler → PBM → insurer → pharmacy → patient

I would move to:

Manufacturer → transparent drug marketplace → insurer/employer → pharmacy → patient

No PBM takes possession of rebates, sets opaque formularies, engages in spread pricing, or owns the pharmacy to which it steers the prescription. The functions PBMs legitimately perform don’t disappear. They get unbundled.

1ne. Manufacturers publish one U.S. Net Price

Forget WAC as the economically relevant number. For every NDC, the manufacturer publishes a Universal Net Price (UNP), which is what it will actually accept for the drug. Suppose a drug currently looks like this:

Under TNP: Published manufacturer price: $525 No $1,000 artificial price. No $400 rebate. No rebate aggregator. No formulary payment. That $525 becomes the starting transaction price for everyone.

This applies the logic demonstrated by Cost Plus Drugs—transparent acquisition cost plus explicit fees—to the entire insured prescription market. Cost Plus publicly describes its model as drug cost + 15% + pharmacy fee. (Homepage of Mark Cuban Cost Plus Drugs)

2wo. Replace PBM formularies with competitive therapeutic bidding

This is where I would stop short of just abolishing PBMs. Someone still needs to foster competition between manufacturers. Establish an independent National Drug Marketplace (NDM) – not necessarily a government entity. It could function more like a regulated exchange. For substitutable drugs, manufacturers submit firm net prices.

Imagine the GLP-1 obesity category:

Drug A: $410/month
Drug B: $375/month
Drug C: $340/month
Drug D: $425/month

But price alone doesn’t determine preferred status. The marketplace calculates a Value-Adjusted Drug Cost:

VADC = Net Drug Price ÷ Expected Clinical Value

Clinical value could incorporate comparative effectiveness, adherence, safety, hospitalization reduction, cardiovascular outcomes and other indication-specific outcomes. Manufacturers therefore compete on price + evidence, rather than on the size of the rebate they are willing to give a PBM.

That changes pharma commercial strategy dramatically.

3hree. Insurers go back to being insurers

Today PBMs effectively operate a shadow purchasing system inside health insurance. Remove it. The insurer pays the transparent net price minus the patient’s benefit obligation. For example:

Drug net price = $400

Patient benefit = 20% coinsurance

Patient pays = $80

Insurer pays = $320

Pharmacy dispensing payment = $12

Total system cost = $412

Every participant can see every number. More importantly, patient cost sharing is calculated from the real $400 price, not some fictitious $900 list price.

4our. Pharmacies get an explicit dispensing payment

One of the biggest mistakes would be eliminating PBMs while leaving pharmacy economics unresolved. Pharmacies should not have to make their money through acquisition-price arbitrage. Pay them explicitly. For example:

Generic dispensing fee: $8
Brand dispensing fee: $12
Specialty dispensing fee: $30–$100 depending upon required services.

Adjunct clinical services — adherence management, injection training & monitoring, medication management — each could have separately published reimbursement. Pharmacy economics would become: Drug acquisition reimbursement + professional service fee instead of a black box of MAC pricing, DIR-like cuts, spread pricing and retroactive reconciliation. See why this matters in the FTC’s specialty-drug analysis.

The Commission’s second interim report estimated that the Big Three PBMs and affiliated specialty pharmacies realized over $7.3 billion in dispensing revenue above estimated acquisition costs for selected specialty generics during 2017–2022. (Federal Trade Commission)

5ive. Replace rebates with volume contracts

Drug manufacturers would still be permitted to discount. There would just be one rule: Discounts always reduce the transaction price.

Let’s say Novo, Lilly or another manufacturer states: If an insurer purchases 1 million prescriptions, we’ll cut our price from $400 to $350. OK. The system captures that $350. You don’t have a $400 claim followed six months later by $50 being routed through a PBM/GPO/rebate spider web. The difference is massive. Manufacturers could compete aggressively on discounts.

6ix. Allow outcomes-based contracts—but make them transparent

Some drugs are different. A $1 million gene therapy cannot necessarily be handled like atorvastatin. So manufacturers could offer:

$800,000 upfront + $200,000 if the patient achieves predefined outcome X.

Or:

$500,000/year for two years, with year two eliminated if treatment fails.

Again, there is no PBM spread. The manufacturer, insurer and independent claims administrator settle the contract according to published rules.

7even. Replace the PBM with boring technology

FYI. PBMs do some things that health plans actually require: claims processing, eligibility, UM, formulary administration, pharmacy network mgmt, prior authorization and fraud detection. Those functions shouldn’t let them control drug economics. Make them into utilities.

An employer might pay:

Claims administrator: $2 PMPM
Clinical/formulary administrator: $1 PMPM
Prior authorization service: $0.50 PMPM

Every Vendor works for a known fee. No Vendor gets a % of drug price. No Vendor keeps manufacturer rebates. No Vendor makes money because a higher-cost drug was chosen. And no Administrator should own the pharmacy network it is filling patients into. That would eliminate the conflict of interest.

8ight. Patients get a real-time prescription price

Before prescribing, the physician’s EHR should display:

Drug A — $32 patient cost / $340 total cost
Drug B — $48 / $375
Drug C — $95 / $425

And show clinically appropriate alternatives. The patient and physician could therefore make the economic decision before the prescription reaches the pharmacy. That creates something prescription drugs barely have today:

Consumer price competition.

9ine. Medicare becomes the proof of concept

There’s already an important precedent. CMS now negotiates Maximum Fair Prices for selected Medicare drugs, and the first negotiated prices took effect January 1, 2026. (CMS)

I would go considerably further. For Medicare Part D, manufacturers would submit their national net prices directly to CMS’s marketplace. Part D plans could negotiate below those prices based on volume, outcomes or market share—but 100% of the negotiated discount must appear in the drug’s transaction price.

No rebate retained somewhere else in the supply chain.

What the economics could look like

Take a hypothetical $1,000-list-price drug.

Existing system

Manufacturer list price: $1,000

Manufacturer ultimately receives: $550

PBM/rebate/GPO/plan arrangements: $450

Pharmacy economics: opaque.

Patient sees: $1,000 list price

TNP system

Manufacturer publishes:

Net drug price: $550

Then:

Pharmacy fee: $12

Claims-processing fee: $2

Total cost:

$564

There isn’t necessarily $436 of additional savings.

That’s important. Much of the current rebate eventually accrues to health plans and employers. The economic breakthrough isn’t simply eliminating $450. It’s eliminating the $1,000 fictional price and the incentives created by the $450 difference between gross and net price. That distinction is frequently lost in the PBM debate.

The most important rule

I would put one sentence into federal law:

No entity involved in selecting, adjudicating, dispensing or paying for a prescription drug may receive compensation that varies according to the list price, rebate, discount or utilization of that drug.

They can be paid. They just can’t make more money because the drug costs more. That one rule changes the incentive structure.

And here’s the pharma-industry tradeoff

Eliminating PBMs doesn’t automatically mean pharma companies make less money. They might actually prefer parts of this system. Manufacturers would surrender the ability to maintain high list prices while negotiating confidential rebates. But they would gain direct access to purchasers and wouldn’t have to buy formulary position through increasingly large rebates.

The competitive question becomes:

“What net price will you offer for this clinical value?”

rather than:

“How large a rebate will you give us off an artificially high list price?”

That’s a much healthier market mechanism. And manufacturers producing genuinely differentiated drugs could still command premium prices.

What I would call it

The Transparent Drug Market (TDM)

Its governing equation would be extraordinarily simple:

Patient/Plan Drug Cost = Published Manufacturer Net Price + Pharmacy Fee + Administrative Fee

No rebates. No spread pricing. No rebate aggregators. No PBM-owned specialty pharmacy steering. No undisclosed post-sale payments. No percentage-of-list-price admin fees. And all three numbers are on the claim. That doesn’t CONTROL drug prices. It creates a free market where drug companies HAVE TO COMPETE on price.

The irony is that this is probably far MORE free-market than the current PBM system. The system we have today hides the true cost of the product from the physician, patient AND often even the employer who is buying the benefit.

The FTC study highlights how flawed that architecture is: A few vertically integrated middlemen exert tremendous influence over which drugs are used, how they are reimbursed and which pharmacies can provide them. (Federal Trade Commission)

For what its worth, in your pharma writing, I think you can build on this with a pretty good follow-on thesis: “Don’t reform PBMs. Make them obsolete.”

The interesting argument isn’t just that PBMs suck. It’s that PBMs were CREATED because the U.S. built a pharma marketplace where literally NO ONE knows the true cost of the product at the time of purchase. Eliminate that, and you eliminate most of the financial justification for a PBM.