WTF is a PBM???

Today’s letter is the reason I started Drugstore Cowboy in the first place. If you…

Then you better buckle up. This is the most important thing you will read today.

If you’ve ever filled a prescription in America, you’ve crossed paths with a PBM. You just didn’t know it.

Caremark. Express Scripts. OptumRx.

These are the three biggest Pharmacy Benefit Managers (aka PBMs) and they control nearly 80% of the prescription drug market in the United States.

They aren’t drug manufacturers. They aren’t pharmacies. And despite what they say, they definitely aren’t working in your best interest.

In fact, most people have never even heard of them.

But they’re the most powerful players in American healthcare - and the reason your medication costs what it does.

I call them the Mafia because they skim money off every transaction and dare you to question why.

It’s hard to explain how massive these companies are, but I’ll give it a shot. In 2023, it was estimated that the “Big 3” PBMs brought in $456.3 Billion in revenue.

For comparison, in 2023 Microsoft reported $232 Billion, Alphabet (Google) reported $324 Billion, and Apple reported $383 Billion.

And those companies operate globally. These PBMs are not messing around.

Pharmacy Benefit Managers were originally created to process prescription drug claims for insurance plans.

Today, that barely scratches the surface. They also:

They don’t make the drugs. They don’t fill them. But they control access, pricing, and payment.

That’s not just middleman territory. That makes them the Corleones.

The most important thing to understand about how PBMs control the industry is their rebate scheme. Here’s how I explain it to my patients at C.O. Bigelow:

That’s the billion dollar question. We call that a rebate.

If a drug company doesn’t give the best answer to that question, it loses potential sales to a third of the market. So each company inflates the price of their drug to make room for a juicy rebate that they can hand directly to the PBM.

The PBM pockets part (or all) of it, and makes sure that statin is the one you’re allowed to get when you go to the pharmacy.

None of this has anything to do with what’s best for the patient. It’s about who pays the most to play.

Now multiply this game across every therapeutic category: diabetes, cancer, ADHD, HIV, asthma, etc... Every drug becomes a bidding war. The more desperate the condition, the higher the stakes.

The PBM rebate system is the number one most corrupt game in America. And we all suffer for it.

Patients

Pharmacies

Employers

Drugmakers

The Government

Everyone loses… except Tony Soprano.

Nephron Research estimates PBMs now capture 42 cents of every dollar spent on brand-name drugs in the commercial market. Think about that for a second. A company that provides zero value to you is getting 42% of the cost of your medication. 

And what does that lead to? The estimated average prescription cost in the US jumped from $69 in 2014 to $95 in 2024, while the number of scripts filled hasn’t risen at even close to the same rate. That’s the tangible effect of drug companies fighting each other to provide PBMs the largest rebate possible.

We are all stuck in a perverse race to the top to see how much these useless middlemen can suck out of our pockets before the whole system comes crashing down.

Because PBMs like it that way. And everyone with the power to do something about it is getting a piece of the pie to keep quiet.

They hide behind other names:

They bury the real costs behind opaque secret contracts.

And they’re vertically integrated:

They are the house, the dealer, and the pit boss. And they’re still telling you the game is fair.

When you walk into the casino at least you already know the odds are stacked against you.

This kind of scheme wouldn’t fly in any other industry. But in healthcare (arguably the most important system in our daily lives) we let it happen. It affects our health, our taxes, and the sustainability of care in this country. And yet, most people still don’t know enough about how it works to fight for real change.

Even lawmakers who want to fix the system can’t easily untangle it. PBMs flood Washington with lobbyists. They spend tens of millions convincing politicians that they’re lowering drug costs, while quietly collecting their cut behind the scenes.

This is how monopolies thrive. Through complexity, confusion, and fear of change.

I’m a fourth-generation pharmacist. I run the oldest pharmacy in America. And I’m telling you: this is the fight that matters. This is why I started this newsletter.

PBMs are draining money from every part of the healthcare system.

They kill independent pharmacies. They warp access to care. They extract money from the sick and call it innovation.

They are robbing us blind right before our eyes. And if we want American healthcare to improve then we need to start shouting about it.

Drugstore Cowboy exists to expose the people behind the curtain. This is only the beginning. What I’ve written today barely scratches the surface on what these companies are doing.

If you just learned all this for the first time, you should be angry. And if I do my job, you’re going to get a lot angrier in the weeks ahead.

So, how can you help change the system?

Listen. Learn. And spread the gospel.

Start by forwarding this to someone you know who needs to hear this. And if someone sent this to you, head to my homepage and subscribe so you can find out more about what we’re up against.

We can’t change what we don’t understand. Let’s start by spreading the truth. This affects all of us. There has to be a better way.

Giddy up.

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