Lilly’s Breakup With the PBM Cartel

Many of my recent newsletters have explored the same question:

“What will it take to finally fix the PBM system?”

By now, you know I don’t have much faith in Congress or the FTC. And no matter how many pharmacy owners scream into the void, it doesn’t seem to get us anywhere.

But the answer has always been obvious, and I wrote it plainly in The Fuse That Could Finally Blow Up the PBM System:

The PBM model collapses the moment large employers stop participating in it.

PBMs only exist because employers keep signing their contracts. They only profit because employers are willing to tolerate rebate games they don’t understand. And they maintain power because employers accept complexity as the price of doing business.

The PBM system is the slot machine. It only keeps spinning if major employers keep pulling the lever.

So when a few of those major employers decide they don’t want to play anymore, it has the potential to cause a chain reaction.

And a couple weeks ago, one of the biggest and most symbolic employers in America — Eli Lilly — did exactly that.

If you’ve been reading Drugstore Cowboy, you already know how the system works:

It’s a closed loop. Everyone inside is conditioned to nod along.

Except the one group big enough to destroy it:

Self-insured employers.

They’re the ones PBMs depend on for the majority of their revenue. And they’re the ones PBMs assume will never revolt because switching looks too complicated.

But something has changed.

A growing number of large employers — like Tyson Foods (~140,000 employees) — have already started ditching the Big Three in favor of transparent PBMs.

If you want to understand why, the difference is simple:

The incentives are so backwards that the traditional PBM makes more money when drugs cost more.

In plain English:

Transparent PBMs cannot profit from steering you to a more expensive drug.

Traditional PBMs can only profit that way.

That’s the whole difference.

Once an employer sees the math, they can’t unsee it.

And cost savings aren’t the only reason to change. In my ERISA piece two weeks ago, I explained the growing legal risk for employers who—whether intentionally or not—profit off their sickest employees through PBM rebates.

The lawsuit is not the cause.
It’s the symptom of a broken economic model.

Here is the moment that should terrify every Big PBM executive in America:

Eli Lilly — a company that helped create the modern rebate system — just decided it no longer wants to participate in it.

Lilly is moving its ~23,000 employees from Caremark to Rightway, a transparent PBM.

This is the loudest possible statement an employer could make:

“The PBM system we helped build no longer works — not even for us.”

It would be irresponsible not to mention that this decision could be partly driven by Caremark choosing not to give Lilly’s drug, Zepbound, preferred placement on their formularies for the coming year.

But honestly? I don’t care why they’re doing it.
It doesn’t make the signal any weaker.

It matters for three reasons:

They helped architect it.
If they don’t see value in staying, other employers will take note.

Rebate-driven formularies distort access to the most important drug class of our time.
Transparent PBMs remove that distortion entirely.

This isn’t ideology. It’s math.
Employers follow economics, not moral philosophy.
And Lilly is showing them where the economics now point.

The Big Three PBMs — Caremark, Express Scripts, and Optum — survive because of momentum.

But when one of the most influential companies in the healthcare ecosystem defects, that inertia breaks.

Lilly is a signal to every benefits executive in America:

“You don’t have to play this game anymore. And if you keep playing, you’re paying for it.”

I repeat:
A pharmaceutical giant has ditched the Big PBMs.

If the drugmaker doesn’t believe in the rebate system anymore, why should the employers (or the patients) trapped inside it?

…it Will Collapse Because Its Customers Walk Away**

This is the beginning of that walk.

And here’s the thing about walkouts:

Tyson was loud.
But Lilly?
That’s a megaphone.

The PBM system doesn’t fear Congress or pharmacists or headlines.

It fears defection.

Money talks. And it moves quickly.
Don’t be surprised if this sparks a mass exodus over the next year.

The most powerful catalyst for PBM reform was never going to be Washington.

It was always going to be employers refusing to support a pricing model that doesn’t serve them — or their employees — anymore.

Eli Lilly’s switch to a transparent PBM is a statement.

And hopefully, a spark.

If the company that built the rebate system no longer wants to live inside it, maybe the rest of us shouldn’t either.

Let’s hope this is just the beginning.

Giddy up.

Alec Wade Ginsberg, PharmD, RPh
4th-Gen Pharmacist | Owner & COO, C.O. Bigelow
Founder, Drugstore Cowboy