How Platform Pricing Aligns Modern PBM Incentives with Employers
Written by
Alan Pannier
Apr 30, 2026
For far too long, employers have been trapped in the legacy pharmacy benefit manager (PBM) web of complexity. It’s hard to question hidden fees and opaque contracts when you don’t understand them, or even get all the information needed to make informed decisions for your plan and business.
Employers are left in the dark while costs skyrocket and pharmacy bills eat up more and more of benefits budgets. Recent pushes for “transparency” and reform were meant to solve these problems, but instead they’ve band-aided over a broken system. Employers will never see meaningful change while PBMs continue to act as the executors of pricing.
Legacy PBMs decide what you pay by manipulating the drug pricing between their overall pharmacy payments and your invoices. They take advantage of a broken system where pharmacies over-earn on some drugs while losing on others, just to hit a vague average reimbursement metric. In addition, legacy players often own and favor their own pharmacies, at the cost of plans.
At SmithRx, we’re not in the business of setting prices to suit a system of vertical integration. To align what our clients pay with true ‘benchmark’ industry prices, we’ve decoupled the ingredient cost of the drug from the service fee we pay to pharmacies. Our platform-based model focuses on reimbursing pharmacies for their actual acquisition cost (using market proxies like NADAC or PAC when necessary) plus a fixed, fair dispensing fee. This eliminates hidden margins and aligns our interests entirely with those of employers.
Let’s dive into how this radically transparent model continuously surfaces the best pricing options available in the market to deliver true savings and cost sustainability to plans and members.
Understanding Modern PBM Platform Pricing Models
Why PBMs Shouldn’t Be the Arbiter of Drug Pricing
Before understanding what makes platform-based pricing so innovative (and successful), we need to examine just how detrimental legacy pricing practices can be.
Legacy PBMs, and even many who claim to be pass-through, often rely on a model of "managing to contract" rather than reflecting real-time market costs. Instead of passing on savings as they happen, these legacy players use forked price lists to manipulate costs across their portfolio, effectively inflating prices for some clients to subsidize others or protect their own margins.
When pricing is tied to static annual guarantees, PBMs don’t have to deliver on the downward trend of market drug costs, and are able to pocket the margin. Plan sponsors are forced into a cycle of constant, painful renegotiations just to get a glimpse of actual market value.
Consistently Delivering True Benchmark Costs
By contrast, modern, platform pricing models are able to keep up with market dynamics to deliver the true lowest net cost to plans. Think of this pricing model like a travel site, such as Expedia. When you search for a flight, Expedia doesn't invent the price or charge different users different rates for the same seat based on their prominence. Rather, it’s an aggregator platform that surfaces the best available market pricing from every airline.
SmithRx’s platform-based pricing model operates on the same premise. We don't set the price of a drug; we surface the lowest net cost from across our network. Whether you are a long-term client or a new group, a small business or a large enterprise, you see the exact same costs.
Combatting Rising Costs with a Fiduciary-Aligned Model
Operating as a PBM with platform-based pricing requires a fundamental rethinking of what it means to be a pharmacy benefit manager. Modern PBMs have moved past the antiquated middleman model to be a true benefits partner to plans. In the legacy PBM world, the PBM sits across the table from plans and employers need to constantly negotiate to get access to the PBM’s "best" pricing.
In contrast, true, modern partnership means sitting on the same side of the metaphorical table and working with plan sponsors to get them the lowest net cost and best outcomes. A PBM becomes a partner that supports negotiating with the supply chain as opposed to the arbiter of drug pricing. The results: As modern PBMs negotiate better deals with pharmacies and manufacturers throughout the year, those savings are surfaced and passed to every client automatically. There is no need to re-negotiate for better rates. If the market price improves, so does the plan’s.
Breaking Down SmithRx’s Modern Platform Pricing Model
SmithRx’s platform-based pricing model is radically simple. It leverages consistent, uncomplicated fee structures that are decoupled from the prices plans pay for drugs.
It’s structured with:
A Flat Administrative Fee: Our revenue comes solely from flat monthly fees. This removes any incentive for us to push expensive, or “high-rebate” drugs. By separating our income from the cost of medications, we ensure our goal is perfectly aligned with the plan’s: to find the most appropriate option at the lowest net cost.
True Benchmark Pricing: Much like travel platforms such as Expedia or Kayak, SmithRx acts as a technology interface that surfaces the best available pricing on the market. We don’t set a price based on our opaque incentives; we expose the real-time, contracted rates directly to our clients and members.
Uniformity for All Clients: For SmithRx clients, a drug costs what it costs. Whether you are a small business or a massive enterprise, and whether you’ve been with us for five years or five days, you receive the same pricing. There are no "forked price lists" or secret tiers. Every client gets the same best-available rate for every medication.
Continuous Optimization without Renegotiation: In the legacy world, you have to wait for an annual audit or a painful renegotiation to see lower costs. With platform pricing, if we negotiate a better rate with a pharmacy or manufacturer at any time, that savings is surfaced and applied to all clients. When the market price drops, your price drops automatically.
Radical Visibility and Transparency: A cost-based, platform model provides a new level of clarity for HR and finance leaders. Instead of prices ‘agreed upon’ by middlemen, you get (and see) the exact price contracted with the pharmacy and the specific discount provided by the drug manufacturer.
Why Platform Pricing is Crucial for Benefits Sustainability
This model shifts the PBM from being an executor of pricing, meaning they ‘decide’ what plans and members pay, to a platform that surfaces the truth. By sitting on the same side of the table as the plan sponsor, we eliminate the need for constant, defensive negotiations.
Plan sponsors can finally meet their obligations to members with total confidence, knowing they are accessing true market rates and that every dollar saved in the supply chain is a dollar that stays in their plan.
The Ultimate Source of Truth: Measuring Your Total PMPM
When evaluating a PBM partnership, it’s easy to focus on guaranteed discounts or complex rebate structures. For plan sponsors, these individual components are often just noise. To understand the actual performance of your pharmacy benefit, you have to look at the Total Per Member Per Month (PMPM) cost.
Think in terms of booking a trip on a set budget: you wouldn’t just look at the cost of individual flights or a booking fee, you look at the entire final cost of the whole round trip. In the PBM world, looking at discounts or rebates in isolation hides the real costs to your plan where some PBMs hide their margins.
Total PMPM is the all-in cost you pay every month for your pharmacy benefits, encompassing every fee and every medication. It is the most honest metric in healthcare, calculated as:
Total PMPM = Admin Fees + Drug Costs // Number of Members x Number of Months
For example: If admin fees are $10 PMPM and average drug costs are $63 PMPM, the total average Total PMPM would be $73.
In the industry standard "managed to contract" model, PMPM is often a moving target which is manipulated by forked price lists and artificial volatility to meet annual guarantees. Because SmithRx surfaces the actual contracted pharmacy rates, your Total PMPM becomes a transparent reflection of the true market. At SmithRx our average PMPM cost for clients is more than 20% lower than industry averages.
It’s time to move past lofty discount promises and focus on measurable, real-world plan value. The future of pharmacy benefits is one where platform-based models lower your bottom line, not just your quoted rates.
Ready to realize your plan’s true potential? Request a repricing analysis to see how our platform pricing impacts your Total PMPM.
Written by
Alan Pannier
Chief Strategy Officer, SmithRx
Alan oversees the company's pharmacy initiatives, including manufacturer relations, network management, and clinical solutions. His background includes clinical leadership roles at Magellan Health and Veridicus Health, as well as hands-on experience as a practicing pharmacist. Alan's academic credentials include an MBA and PharmD from Idaho State University, a Bachelor's in Chemistry and Business from Westminster College, and specialized training in managed care pharmacy. His comprehensive understanding of the industry drives SmithRx's innovative approach to pharmacy benefits management.
