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The Federal Trade Commission’s (FTC) recent settlement with Caremark Rx LLC and Zinc Health Services LLC (collectively Caremark) marks another significant regulatory intervention in the pharmacy benefit manager (PBM) space. The FTC’s lawsuit focused on allegations that major PBMs used rebating practices that inflated insulin list prices and shifted costs to patients whose out-of-pocket expenses were tied to those list prices.
The Caremark settlement goes beyond insulin, requiring changes to business practices designed to lower member out-of-pocket costs, increase transparency for plan sponsors, and address how Caremark works with retail community pharmacies and pharmacy hub service providers.
For PBMs, the agreement may signal continued movement toward net cost pharmacy pricing models, point-of-sale rebate structures, greater transparency, and increased scrutiny of PBM compensation and formulary economics. Regardless of whether these specifics apply to other PBMs, the settlement may influence how plan sponsors, consultants, and regulators evaluate PBM models going forward.
Components of the Caremark settlement
Under the FTC’s proposed consent order, Caremark would be required to make several structural changes through its standard offering and related business practices. The settlement terms are similar in many respects to the FTC’s earlier settlement with Express Scripts, but the Caremark agreement also addresses pharmacy hub service provider access.
Key provisions include:
Ceasing discrimination against low wholesale acquisition cost (WAC) versions of drugs on standard formularies.
Providing a standard offering that passes rebates through to members at the point of sale and limits member out-of-pocket costs to no more than the plan sponsor’s contracted rate minus applicable rebate.
Allowing plan sponsors to transition off rebate guarantees and spread pricing within the standard offering.
Delinking, for the standard offering, manufacturer-paid PBM/group purchasing organization’s (GPO) fees from drug list prices.
Increasing transparency for plan sponsors, including more visibility into pricing and compensation arrangements.
Including certain terms in the standard offering to retail community pharmacies, with an opportunity to shift to a cost-plus reimbursement model.
Transitioning and maintaining PBM/GPO activities in the U.S.
Maintaining insulin affordability programs that cap member out-of-pocket costs when an applicable insulin product is covered, unless the plan sponsor opts out in writing.
Prohibiting unfair interference with network pharmacies’ ability to work with pharmacy hub service providers, supported by a monitor empowered to receive complaints and review actions.
Addressing TrumpRx treatment under certain legislative or regulatory changes, including counting eligible patient payments toward deductibles and out-of-pocket maximums when applicable.
Together, these provisions are designed to increase transparency, reduce reliance on rebate-driven pricing practices, and expand member access to lower-cost pharmacy options.
The move toward true net-cost pricing
The settlement further reinforces the market shift toward true net-cost pharmacy pricing models. Today’s PBM market largely operates on a gross-to-net framework. A drug may carry a high list price at the pharmacy counter, while manufacturers later provide rebates that reduce the net cost of the medication for the plan.
Under traditional rebate models, members may pay cost-sharing based on the higher list price, while employers receive rebate payments later as part of the plan’s financial arrangement. The Caremark settlement is intended to move more of that value to the point of sale, potentially allowing members to see lower out-of-pocket costs when prescriptions are filled.
Potential implications for other PBMs
The Caremark settlement may have implications well beyond a single PBM. As plan sponsors become more familiar with point-of-sale rebates, net-cost pricing, and greater visibility into PBM economics, these features may increasingly become expectations in PBM procurements and contract negotiations. PBMs should consider how their current business models, pricing structures, and client value propositions would perform in an environment where greater emphasis is placed on net cost, member affordability, and transparency.
Potential implications include:
Greater demand for net-cost pricing options: Plan sponsors and consultants may request pricing models that demonstrate the true net cost of a drug after rebates and discounts.
Increased interest in point-of-sale rebate models: PBMs may need to offer additional flexibility around how rebates are allocated between plan sponsors and members.
Changes to rebate guarantees and financial underwriting: Moving rebates to the point of sale may require PBMs to reconsider traditional rebate guarantees, pricing assumptions, and financial mechanics behind those guarantees.
Greater scrutiny of PBM compensation: Plan sponsors may seek greater visibility into admin fees, clinical program fees, network economics, GPO arrangements, and other sources of PBM revenue.
More sophisticated comparisons of PBM proposals: PBMs may need to demonstrate value through nontraditional guarantees such as PMPM guarantees.
Potential changes to formulary economics: Greater emphasis on net cost and PMPM guarantees may affect formulary strategy, manufacturer negotiations, and the relative value of products with high list prices and significant rebates versus lower list price alternatives.
Continued evaluation of pharmacy network economics: The settlement’s provisions related to retail pharmacies and hub service providers may contribute to broader market expectations regarding pharmacy reimbursement and network participation.
For PBMs, the broader implication is that competitive differentiation may increasingly depend not simply on the size of a rebate guarantee or pharmacy discount, but on the ability to demonstrate sustainable net cost savings, member affordability, transparency, and clinical value.
Considerations for PBMs
As Caremark begins responding to the settlement and the market evaluates its implications, other PBMs should consider how their own offerings may need to evolve.
Product strategy: Evaluate whether current offerings provide sufficient flexibility to support point-of-sale rebates, rebate-free arrangements, and true net-cost pricing.
Contracting: Review contract language related to rebates, spread pricing, manufacturer revenue, GPO arrangements, transparency, audit rights, and other sources of PBM compensation.
Underwriting and guarantees: Assess how alternative rebate structures could impact rebate and discount guarantees.
Formulary strategy: Evaluate how greater focus on net cost and member affordability could influence formulary placement and manufacturer contracting.
Client reporting: Do existing reports clearly demonstrate gross cost, rebate value, member cost share, PBM compensation, and ultimate net plan cost?
Sales and RFP strategy: Prepare for consultants and plan sponsors to ask more detailed questions about net cost, point-of-sale rebates, and PBM revenue sources.
Network strategy: Review retail pharmacy reimbursement and network arrangements in light of marketplace attention to pharmacy access and reimbursement practices.
Competitive positioning: Consider how greater transparency can become a differentiator rather than simply a compliance requirement, and how you will communicate and market transparency to consultants and plan sponsors.
What PBMs should do now
PBMs do not necessarily need to redesign their business models based on the FTC settlements alone. However, the agreement provides an important opportunity to assess how regulatory scrutiny and changing plan sponsor expectations could affect future offerings.
Recommended next steps include:
Review current pricing and contracting models against the practices addressed in the Caremark settlement.
Model the financial impact of point-of-sale rebates, rebate-free arrangements, and true net-cost pricing alternatives.
Evaluate whether current rebate guarantees and other financial guarantees remain appropriate under alternative pricing structures such as POS rebates.
Identify all sources of PBM compensation and determine how clearly those economics can be explained to clients and consultants.
Assess formulary and manufacturer contracting strategies through both a net-cost and member-affordability lens.
Review pharmacy network and reimbursement practices for potential areas of increased regulatory or client scrutiny.
Prepare sales, account management, and RFP teams to answer increasingly detailed questions about PBM economics and transparency.
Monitor how Caremark implements the settlement and whether similar concepts emerge in future FTC actions, legislation, consultant RFP requirements, or plan sponsor contracting expectations.
The key takeaway for PBMs is not that every organization must adopt Caremark’s required model. Rather, the settlement may accelerate a broader shift in how PBM value is defined and evaluated, from gross discounts and rebate guarantees toward net cost, transparency, member affordability, and demonstrable clinical and financial outcomes.
Contact your Apture Pharmacy team (opens a new window) to discuss what the FTC settlements may mean for your organization.