The Federal Trade Commission’s (FTC) recent settlement with Express Scripts (ESI) marks one of the most significant regulatory interventions in the pharmacy benefit manager (PBM) space in years.
While the FTC’s lawsuit originally focused on insulin pricing practices, the settlement goes further, requiring structural changes to how Express Scripts prices drugs, manages rebates, works with pharmacies, and reports information to plan sponsors.
Additional actions from CVS Caremark or OptumRx may follow, but details remain uncertain, and any developments will depend on whether the parties choose to settle or proceed with litigation.
For employers, the agreement may signal a broader shift in the industry toward true net-cost drug pricing models, with potential implications for pharmacy benefit design, budgeting, and future PBM contracting.
Key components of the Express Scripts settlement
Under the agreement, ESI will be required to introduce a new “standard offering” for plan sponsors by January 1, 2028. This offering includes several structural changes designed to increase transparency and align pricing more closely with the underlying cost of medications. Employers, however, may still request alternative arrangements, provided they comply with any applicable federal requirements, if they prefer a model other than the standard option.
Key provisions include:
Pricing net of rebates and elimination of spread pricing within the standard offering
Acquisition-cost-based pricing models
WAC-neutral formulary structures designed to prioritize the lowest-cost therapies
Patient Assurance insulin program access, which caps monthly insulin costs for members
Expanded transparency requirements, including broker compensation disclosures and detailed drug-level reporting
Integration of TrumpRx purchases into deductibles and out-of-pocket maximums
Together, these provisions are designed to increase transparency and limit pricing practices that rely heavily on rebate structures.
The move toward true net-cost pricing
The settlement represents the clearest move yet toward true net-cost pharmacy pricing models.
Today’s PBM market largely operates on a gross-to-net pricing structure. A drug may have a high list price at the pharmacy counter, while manufacturers later provide rebates that reduce the net cost of the medication.
Under traditional rebate models, members often pay cost-sharing based on the higher list price, and employers receive rebates later, often as part of quarterly reconciliation.
The ESI settlement moves toward a model where the net cost is reflected earlier in the transaction, potentially allowing members to see lower prices at the pharmacy counter.
Potential implications
While net-cost pricing may improve member affordability, it also introduces new dynamics for employer pharmacy budgets.
Rebate payments are part of the financial model for many employer health plans, and are often incorporated into pharmacy projections, premium calculations, and overall plan cost expectations.
If more of that value shifts directly to members at the point of sale, employers could see:
Changes in how pharmacy costs appear
Reduced rebate checks that are currently used to offset plan costs which will create new considerations for budgeting projections
As a result, employers may need to reassess how pharmacy spend is modeled and evaluated.
Key considerations for employers
As ESI begins implementing these changes, plan sponsors should expect proposals and contract structures to evolve.
Future bid structures: Expect ESI bids in 2026 and 2027 to increasingly feature rebate-free or net-cost pricing models.
Existing contracts: Current agreements remain in place, but new proposals may incorporate elements of the settlement’s standard offering.
Budget implications: Pricing net of rebates could improve member affordability but may shift the timing and distribution of rebate dollars.
Operational questions: Certain mechanics, including TrumpRx integration, remain unclear.
Market developments: While this settlement only applies to ESI, similar regulatory actions involving CVS or OptumRx could follow.
What employers should do now
Employers do not need to take immediate action, but the settlement signals that PBM contracting and pricing structures may continue evolving.
Recommended steps include:
Reviewing PBM contract terms and renewal timing relative to the settlement’s 2027–2028 implementation window
Leveraging pharmacy experts for budget modeling discussions around net-cost versus rebate-driven pricing structures
Monitoring developments across the broader PBM market
Working with advisors to evaluate potential financial impacts
Lockton is closely monitoring how these changes may affect employer pharmacy strategies.
Speak to an expert (opens a new window) to learn more about analyzing financial implications, assessing contract structures, and navigating evolving PBM market dynamics as more unfolds.
