Reducing Costs, Not Quality: The Pass-Through PBM Approach to Healthcare Savings

Reducing Costs, Not Quality: The Pass-Through PBM Approach to Healthcare Savings

The Pass-Through PBM – a groundbreaking approach that not only slashes costs but ensures value-driven healthcare management. Let’s explore the merits of Pass-Through PBMs, emphasizing their singular focus on driving the lowest cost, most effective medications, without any hidden revenue streams or other incentives.

What is a Pass-Through PBM?

A Pharmacy Benefit Manager (PBM) acts as an intermediary between healthcare providers and consumers, managing prescription drug benefits on behalf of health insurers, employers, and other plan sponsors. The Pass-Through PBM model differs significantly from the traditional PBM approach. It operates with complete transparency and aligns its incentives with the goal of reducing costs and improving healthcare quality.

Traditional PBMs often bundle various services, including claims processing, formulary management, and mail-order pharmacy, with drug pricing. These PBMs may negotiate rebates and other financial arrangements with pharmaceutical manufacturers and may not always pass on the full benefit of these deals to their clients. As a result, the total cost savings achieved for self-funded employers and their employees can be opaque and uncertain.

In contrast, Pass-Through PBMs focus solely on one thing: providing the lowest cost, equally effective medications. True Pass-Through PBMs do not retain hidden revenue streams from rebates or other incentives. Instead, they pass on the full value of negotiated discounts and rebates to their clients. This approach ensures that employers and plan sponsors can achieve substantial savings without compromising on the quality of care provided to their members.

The Benefits of Pass-Through PBMs

1. True Cost Transparency

Pass-Through PBMs lay bare the actual cost of medications. There are no hidden fees, no undisclosed rebates, and no financial arrangements that influence the pricing. The price clients see is the price they pay. This stark clarity allows self-funded employers and plan sponsors to know precisely where their healthcare budget is allocated, ensuring that they have a direct line of sight into their spending. 

The transparency provided by Pass-Through PBMs empowers clients to make fully informed decisions about their healthcare spending. Armed with the true cost of medications, they can make strategic choices regarding their benefit plans, formulary inclusions, and overall healthcare budgeting. This level of visibility ensures that healthcare decisions are not made in the dark but are driven by data and facts.

Furthermore, clients can better anticipate and plan for their healthcare expenses with precision and foresight. They can analyze historical usage patterns, identify potential cost-saving opportunities, and make strategic adjustments to their benefit plans to optimize cost-effectiveness. In essence, transparency fosters proactive and data-driven decision-making, allowing clients to take control of their healthcare expenditures and design plans that align with their unique needs and financial goals.

2. Savings without Sacrificing Quality

The commitment to quality extends to the very core of Pass-Through PBMs’ decision-making processes. When selecting formulary medications and treatment options, their focus remains firmly on clinical efficacy. Medications that make it to the formulary are there because they have demonstrated their effectiveness in treating medical conditions.

The clinical expertise and research-driven approach of Pass-Through PBMs ensure that their clients’ members receive the most appropriate and effective treatments. By making decisions based on clinical merit, rather than financial incentives, patients can have confidence that their prescribed medications are selected for their ability to improve health outcomes.

Pass-Through PBMs are champions of value-driven healthcare management. They consider the long-term health and financial benefits of their clients and their members as the ultimate goal. This perspective means that quality is never compromised for the sake of short-term savings.

The medications included in Pass-Through PBM formularies are those that represent the best value for the healthcare dollar. They are not the cheapest options regardless of efficacy, but rather the most cost-effective medications that offer optimal health benefits. This approach results in cost savings that do not come at the expense of patient well-being.

3. Freedom to Choose

Traditional PBMs have been known to engage in rebate agreements with pharmaceutical manufacturers. These agreements often lead to formulary designs that prioritize medications offering higher rebates rather than those that may be lower in cost. In such cases, patients and their healthcare providers may find themselves directed towards specific drugs not because they are the best fit for the patient’s clinical needs, but because they offer greater financial incentives to the PBM.

Pass-Through PBMs distinguish themselves by breaking free from this rebate-driven approach. They prioritize the lowest cost medication with equally effective clinical outcomes rather than medications with the highest rebate value. In a Pass-Through PBM model, physicians and patients have the freedom to choose the most appropriate treatment based on clinical need, without undue influence from financial considerations.

4. No Spread Pricing

In traditional PBMs, spread pricing is a pricing model where the PBM charges the plan sponsor (the employer or health plan) more for prescription medication than what it pays to the pharmacy. The difference between what the PBM charges the plan sponsor and what it reimburses the pharmacy is called the “spread.” This spread can vary widely and is often not transparent.

The problem with spread pricing is that it lacks transparency, and the plan sponsor may not even be aware of the extent of the spread. Where this can be particularly harmful is when the traditional PBMs reimburse the pharmacies less than the cost of the medications.

In contrast, pass-through PBMs do not engage in spread pricing. They charge the plan sponsor exactly what they pay to the pharmacy for each prescription medication. The pass-through PBM’s fee is typically a separate and transparent administrative cost, which is often a fixed per-script or per-member-per-month (PMPM) fee. 

For example, if a pass-through PBM reimburses the pharmacy $80 for a specific medication, they will charge the plan sponsor $80 plus their transparent administrative fee. There is no spread in this pricing model, which removes hidden revenue streams to the PBM, ensuring full transparency and the plan understanding exactly what the pharmacy benefit costs them. 

The Role of Incentives in Pass-Through PBMs

A defining feature of the Pass-Through PBM model is the absence of hidden revenue streams or conflicting incentives. Traditional PBMs may derive a substantial portion of their revenue from undisclosed financial arrangements, which can create a misalignment of interests and financial motives that may not always prioritize cost-effectiveness.

Pass-Through PBMs, on the other hand, operate under a single guiding principle – driving the lowest cost, most effective medications. This unique incentive structure ensures that Pass-Through PBMs work tirelessly to negotiate the best possible drug prices and pass on the entirety of the savings to their clients. They have no conflicting interests or ulterior motives. Their focus is purely on the bottom line for their clients, ensuring that cost savings are not diluted or redirected for any other purpose.

MaxCare’s Commitment to Value-Driven Healthcare Management

At MaxCare, we fully embrace the Pass-Through PBM model. Our sole source of revenue is derived from plan administration, aligning our interests directly with the goal of ensuring that our members utilize the lowest cost, equally effective medications. This approach reflects our unwavering commitment to providing cost-effective solutions for self-funded employers and plan sponsors, reaffirming our dedication to value-driven healthcare management.

Our comprehensive, value-driven healthcare management strategy focuses on utilizing the most cost-effective and clinically effective medications. These savings are then passed on to our clients, allowing them to realize substantial cost reductions while maintaining the quality of care they provide to their members. We consider it our responsibility to deliver substantial savings and quality healthcare management that can empower organizations to make the most of their healthcare budgets.


The Pass-Through PBM model’s unwavering commitment to cost transparency, value-driven healthcare management, and the absence of hidden incentives make it the ideal solution for achieving significant cost savings without compromising quality.

As we’ve seen, the Pass-Through PBM model, exemplified by MaxCare, is the future of fully transparent healthcare cost management. By prioritizing the lowest cost, most effective medications and eliminating  pricing and hidden revenue streams, Pass-Through PBMs empower their clients to provide top-quality care to their members while reaping substantial financial benefits.

More To Explore

Stay Informed with MaxCare

Subscribe to our newsletter for regular updates, industry news, and exclusive content. Stay ahead with expert insights, special offers, and helpful resources.