Prescription drug costs for patients go down even when the official price of the medicine goes up.
April 26, 2026
Original Paper
Intermediary Margins and Drug Costs: Evidence from PBM Spread-Pricing Bans
SSRN · 6601878
The Takeaway
Many state governments have banned spread pricing, a practice where middleman companies charge insurance more than they pay pharmacies. These bans successfully lowered the out of pocket costs for patients by squeezing the profit margins of these intermediaries. This happened even as the negotiated list prices for many drugs continued to climb. The financial health of the patient depends more on the middleman's cut than on the price set by the drug manufacturer. Managing the hidden fees in the supply chain is a more effective way to lower healthcare costs than price controls on the products themselves.
From the abstract
Pharmacy benefit managers (PBMs) often use spread pricing, charging health plans more for a drug than they reimburse pharmacies and retaining the difference. We study how state bans on spread pricing affect negotiated prices and beneficiary costs in Medicare Part D. Using staggered policy adoption between 2020 and 2025, we estimate event-study difference-indifferences models on plan-county-year data linked to drug acquisition-cost benchmarks. We find that spread-pricing bans reduce beneficiary c