Before You Renew Your PBM Contract, Ask These 12 Questions.
Two self-insured employers ran their PBM contracts through this checklist. One cut pharmacy spend 47% ($484,000 in year one). The other generated $500,000+ in first-year savings, with employee out-of-pocket costs down 23% by 18 months. Get the questions, the answers to watch for, and the five contract terms that may signal you’re overpaying.
The exact 12 questions to email your PBM (copy, paste, send)
Two real carve-outs, with the numbers: $484,000 and $500,000+ saved in year one
The 5 contract terms that signal you're overpaying
Free. No obligation. No medical-plan or broker change required. Work email only.
Written by Eric Papp. As presented at SHRM’s 2026 national conference.
47%
Year-one pharmacy cost reduction at a 200-employee employer
200 to 2,000
Employee groups this is built for
$0
Cost to send the 12 questions to your PBM
8 of 8
Implemented carve-outs delivering 30 to 40% savings in year one
Figures are from two client engagements. Results vary by plan, contract terms, and utilization.
What You Get
The 27-Page Pharmacy Carve-Out Playbook
The 12 questions are only the starting point. This executive guide shows you what to look for, how to interpret your PBM’s answers, and what to do before your renewal window closes.
Inside the Playbook:
The copy-and-paste 12-question email to send your PBM
Five contract dangers that may reveal hidden revenue and unnecessary spending
A side-by-side comparison of legacy and transparent PBM contracts
Two real employer case studies, including a 47% pharmacy-cost reduction and $500,000+ in first-year savings
A four-week action plan that takes you from questions to a clear decision
Renewal deadlines, employee-disruption expectations, and a plain-English PBM glossary
By the end, you’ll know:
Whether your current PBM contract is truly transparent
Where money may be leaving your pharmacy plan
What to do next, without changing your medical plan or broker
Free for self-insured employers with 200 to 2,000 employees. No obligation.
The five contract dangersThe 12 questionsThe 30-day action plan
Why Employers Overpay
Three PBMs Control 80% of Claims. Their Contracts Share the Same Three Terms.
We audited the contracts behind both case studies. Different PBMs, different employer sizes, same three terms: the PBM keeps the manufacturer rebates, spread pricing is allowed, and there is a financial penalty for leaving early. None of it is illegal. The question for a plan fiduciary is simply: who does this benefit?
CVS Caremark
Largest PBM by prescription volume
Express Scripts
Part of Cigna — second largest PBM
Optum Rx
UnitedHealth Group subsidiary
Employers evaluate pharmacy
performance through discounts and rebates — not true net cost
Misaligned incentives can
cause "savings" on paper to mask rising overall pharmacy spend
Complex reporting structures
obscure what employers are actually paying
Without full transparency,
employers can't benchmark or challenge their PBM arrangement
Case study
$484K
200-employee national law firm. Spread pricing on 60% of generic claims, a rebate guarantee covering only 71% of eligible claims, and no audit rights. In year one: $484,000 saved, a 47% reduction, with about 3% of members affected.
Case study
$500K+
1,500-employee hospitality group. The carve-out generated $500,000+ in first-year savings. By 18 months, employee out-of-pocket costs were down 23%, with only about 3% of members experiencing a medication change.
~80%
of U.S. prescriptions are managed by the three largest PBMs, leaving most employers with limited negotiating leverage and little visibility into true costs. Source: FTC interim staff report on pharmacy benefit managers, July 2024.
Six ways money leaves a pharmacy plan without showing up on a report
Misaligned Incentives
PBM compensation structures can reward volume and rebate capture
rather than lowering your organization's net drug cost.
Complex, Hard-to-Audit Contracts
PBM contracts are often structured in ways that obscure the
relationship between reported savings and actual spend changes.
Reporting Focused on Discounts
When reporting centers on discounts and rebates rather than total
cost trend, it becomes difficult to assess whether the plan is
truly performing.
Spread Pricing Practices
In some arrangements, PBMs charge employers more than they
reimburse pharmacies — capturing the difference as undisclosed
revenue.
Specialty Drug Exposure
Without active specialty management strategies, employers may face
significant and unexpected cost increases driven by a small number
of high-cost prescriptions.
Formulary Design Gaps
Formularies that aren't actively managed may allow higher-cost
branded drugs to be dispensed when clinically equivalent generics
are available.
Solution
What Transparent Pharmacy Carve-Outs Can Change
High-performing employers are taking a closer look at pharmacy and
asking whether a more transparent model can deliver better
alignment, greater control, and lower net cost.
A transparent pharmacy carve-out can help employers move away from
opaque pricing structures and toward a model where incentives are
aligned around reducing actual spend, not just producing
favorable-looking reports.
Eric Papp presenting "The Hidden Cost of Pharmacy Benefits" at the SHRM Annual Conference, June 2026.
Full Cost Transparency
See exactly what you're paying — ingredient cost, dispensing
fees, and any margins — with no hidden spread pricing.
Aligned Incentives
Work with a PBM model where success is measured by actual
cost reduction — not rebate volume or network spread.
Greater Employer Control
Own your own formulary and clinical programs — making
decisions based on your population's needs, not the PBM's
book of business.
Lower Net Cost
The goal of a transparent carve-out is measurable,
sustainable reduction in what you actually spend on pharmacy
— not just better-looking reports.
Eric Papp · Tampa, FL
About Eric
Who Is Behind This
Pharmacy Benefits Unbundled is an educational resource from Eric Papp, a Tampa-based employee benefits consultant who works with self-insured employers with 200 to 2,000 employees.
His work centers on a question most plans have never asked out loud: what does the pharmacy benefit actually cost once you separate it from the medical plan? Eric is the author of Leadership by Choice (Wiley) and Manage Promises, Not People, and spoke on pharmacy carve-outs at SHRM’s 2026 national conference. Eric is a graduate of the University of Notre Dame.
Our Goal Is Simple
"We work for you, not the carriers."
What You Can Expect:
We Do Not Receive Compensation From the PBM
What we are paid for pharmacy work comes from the employer and is disclosed to you. The PBM pays us nothing, so the only thing the recommendation can be about is your net cost.
Deep Pharmacy Expertise
Our team has experience evaluating PBM contracts, carve-out
structures, and specialty drug management strategies across
a wide range of employer sizes and industries.
Practical, Actionable Guidance
We focus on clear analysis and concrete steps — not abstract
frameworks or long consulting engagements that delay real
decisions.
No Broker Change Required
The 12 questions and the Executive Pharmacy Review work alongside your current broker and carrier. Nothing has to change for you to see what your PBM contract actually costs.
The copy-and-paste email, plus the 27-page Playbook that shows you what the answers mean. Forward the questions to your PBM tomorrow morning. No commitment in asking.
Frequently Asked Questions
Our renewal is January 1. Is there still time?
Yes, but the window is short. Most PBM contracts auto-renew unless you give 60 to 90 days' written notice, which for a January 1 renewal means acting this fall. Miss it and the contract locks in for another two to three years. Sending the 12 questions takes ten minutes and tells you whether you need to act at all.
Will a pharmacy carve-out disrupt employees?
In the carve-outs we have implemented, about 95% of members saw no change at all: same pharmacy, same medication, same routine. Many paid less. The real work focused on the roughly 3% of members who drive about 70% of plan spend in our client data, and even there it was about finding a lower-cost path to the same drug, not restricting access. Escalations go to your consultant, not your HR team.
Is this a sales pitch?
No. The Pharmacy Carve-Out Playbook is intended to help you better understand how
pharmacy spend works and what questions to ask. There is no
sales pressure and no obligation.
Do I need to make a change to my medical plan to benefit from
this?
No. In most cases your medical stays the same. A pharmacy
carve-out is a separate arrangement that focuses specifically on
prescription drug benefits, independent of your medical carrier.
Who is behind this page?
Eric Papp, an employee benefits consultant in Tampa who specializes in pharmacy carve-outs for self-insured employers and spoke on the topic at SHRM’s 2026 national conference. The firm he works with is named in the footer. Nothing on this page is for sale; the 12 questions are yours to send whether or not we ever talk.
What happens after I send the questions to my PBM?
You will get answers, partial answers, or silence, and each one tells you something. If the answers raise concerns, or the PBM will not answer, you can request an Executive Pharmacy Review. It is also free and does not require changing brokers.
Get in Touch
Questions about your PBM contract, or want a second set of eyes on the answers you get back? Email Eric directly. Replies come from him, not a sales team.
Pharmacy Benefits Unbundled collects only what you enter in the form: your name and work email. We use them to send The Pharmacy Carve-Out Playbook and occasional emails about pharmacy benefits. You can unsubscribe from any email with one click. We do not sell or share your information. Standard website analytics count visits. Questions: epapp@mewilson.com.
This page is for general information only and is not legal, tax, or financial advice. Savings figures come from client engagements; results vary by plan, contract terms, and utilization.
