The Effects of Spread Pricing on Self-Funded Employers

For many self-funded health plans, pharmacy spend is both one of the most expensive and least transparent areas of cost. One major driver of rising pharmacy costs is spread pricing.

Spread pricing is often marketed as a standard aspect of pharmacy benefit management, but this practice exposes employers to hidden costs, misaligned incentives, and a lack of clarity.

Understanding how spread pricing works, its impact on health plans, and alternative options is critical for self-funded employers looking to control plan spend for long-term sustainability.

What is spread pricing?

Spread pricing is a practice in which a pharmacy benefit manager (PBM) charges your health plan a certain price for a medication, reimburses the pharmacy a lower amount, and keeps the difference, or the “spread.” The PBM’s profit — the difference in prices — is usually not visible to the employer.

How spread pricing impacts self-funded employers

Employers pay more than the amount reimbursed to the pharmacy

With spread pricing, the PBM charges the plan an inflated price over what the pharmacy is paid. Employers absorb the higher cost without any visibility into the true price of the medication.

Employers lack transparency in pharmacy spend

Self-funded health plans need clear data to make informed decisions. Spread pricing can limit visibility into the amount that pharmacies are reimbursed, making it difficult to accurately forecast costs, evaluate plan performance, and benchmark pricing against the market.

The PBM’s incentives contradict the employers’ goals

Under spread pricing, PBMs profit when the gap between what they charge you and what they pay the pharmacy grows. This structure can create financial incentives that are not always aligned with an employer’s goal of minimizing total drug spend.

Employers must react to rising costs

When pharmacy costs increase without a clear explanation, employers are often forced to raise premiums, increase deductibles, or limit members’ formulary access. Members pay the price by paying higher costs or receiving lower-quality care.

The costs add up quickly

Even seemingly minor spreads can add up to significant financial impact when applied across thousands of prescriptions.

For specialty medications, the spread can be substantially larger, creating outsized cost exposure for employers managing high-cost claims.

Traditional PBMs and spread pricing

Spread pricing is often built into traditional PBM contracts. Under these contracts, employers cannot verify whether negotiated discounts are actually being passed through, how pricing decisions are made, or the true drivers of pharmacy spend.

The lack of accountability makes it difficult to control costs or make informed decisions.

Thankfully, self-funded employers don’t have to be limited to traditional PBMs or practices with limited transparency.

Pass-through models: a better approach

Rather than settle for spread pricing, self-funded employers are increasingly turning to a pass-through pharmacy approach.

In this model:

• The plan pays the actual cost of the drug
• The PBM fully discloses all rebates and discounts directly to the employer
• The employer pays the PBM a clearly defined, flat administrative fee

The positive effect of this change is significant.

In one example, under spread pricing, an employer was billed over $5,300 for the specialty medication Sapropterin. After moving to a transparent, pass-through model, the group realized savings of nearly 50%, paying just over $2,700 for the same medication.

These measurable cost savings highlight the importance of visibility — and the real financial risks of operating without it.

The bottom line

Spread pricing introduces unnecessary costs, limited transparency, and misaligned incentives that all work against the interests of self-funded employers.

By adopting a pass-through strategy that prioritizes clear pricing, aligned goals, and data visibility, employers can reduce their total pharmacy spend, improve financial predictability, and make strategic decisions.

OneVeracity’s integrated approach to health plans includes a pass-through pharmacy model that prioritizes the needs of self-funded employers first.

Learn more about our integrated care solutions designed to promote transparency, reduce financial risk, and prioritize member support.

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