When Pass-Through Isn’t Pass-Through: PBM GPOs and the Reengineering of Rebates

For decades, Pharmacy Benefit Managers (PBMs) have positioned themselves as indispensable intermediaries in the prescription drug supply chain. Originally created to help employers and insurers administer pharmacy benefits efficiently, PBMs gradually expanded their role into formulary management, rebate negotiation, pharmacy reimbursement, claims adjudication and data analytics. That expansion was accompanied by unprecedented consolidation, vertical integration and complexity. Today, the largest PBMs control access to patients, dictate reimbursement terms to pharmacies and negotiate pricing with manufacturers, all while operating within corporate families that include insurers, specialty pharmacies and mail-order pharmacies.

In recent years, a new structural development has emerged that warrants serious attention from plan sponsors, pharmacies and regulators alike: the creation of PBM-affiliated group purchasing organizations, commonly referred to as PBM GPOs. While the terminology suggests a familiar and benign model, these entities differ materially from traditional GPOs and raise fundamental questions about transparency, fiduciary alignment and the true flow of drug-pricing dollars.

Traditional group purchasing organizations have long played a role in healthcare. Hospitals, clinics and provider networks join GPOs to aggregate purchasing volume, negotiate discounts and reduce administrative burden. These arrangements are typically transparent, modestly compensated and designed to deliver measurable savings to participating providers. PBM-created GPOs or Rebate Aggregators, by contrast, do not serve independent provider members. Instead, they function as affiliated entities controlled by PBMs themselves, often operating outside the United States and performing narrowly defined administrative functions.

The concern is not merely theoretical. PBMs have spent years assuring employers and government payors that rebate pass-through models address longstanding transparency criticisms. Contracts increasingly advertise the return of “100 percent of rebates” to plan sponsors. Yet those assurances depend entirely on how rebates are defined. As PBMs reclassify manufacturer payments as administrative fees or service charges routed through affiliated GPOs, the economic substance of rebate retention can remain intact even as contractual promises appear satisfied.

A recent investigative report by Hunterbrook Media brought renewed focus to these PBM-affiliated GPO structures, highlighting how they operate, where they are domiciled and how they generate revenue disproportionate to their apparent staffing and operational footprint. While the report itself is not dispositive, it crystallized concerns that regulators, plan sponsors and pharmacies have been voicing quietly for years. The existence of lightly staffed foreign entities collecting substantial manufacturer payments naturally invites scrutiny, particularly when those payments originate from the same drug pricing ecosystem PBMs claim to manage in the best interests of their clients.

From a legal and fiduciary perspective, the issue is straightforward. Employers and other plan sponsors rely on PBMs as vendors that materially influence plan costs. Under ERISA and parallel state-law frameworks, plan fiduciaries are obligated to understand how their vendors are compensated and whether incentives align with the interests of plan participants. When PBMs retain value through affiliated entities that are contractually carved out of rebate definitions, the risk of misalignment increases. Even absent wrongdoing, opacity alone undermines trust and frustrates effective oversight.

Independent pharmacies experience the downstream effects of these structures in a different but equally tangible way. PBMs wield enormous leverage over pharmacy reimbursement, audit activity, network participation, and claims adjudication. As PBMs extract additional revenue upstream through manufacturer payments and affiliate arrangements, pressure intensifies downstream to reduce pharmacy reimbursement and increase recoupments. Pharmacies are audited aggressively, reimbursement methodologies grow more restrictive and network participation becomes increasingly precarious. The system functions less like a neutral benefit administrator and more like a vertically integrated gatekeeper.

This dynamic is particularly troubling when viewed against the broader backdrop of PBM consolidation. The dominant PBMs are not merely negotiating drug prices; they are steering utilization toward affiliated pharmacies, specialty channels and mail-order platforms. When those same PBMs also control affiliated GPOs collecting manufacturer payments, the line between cost containment and revenue maximization becomes blurred. The result is a marketplace in which no stakeholder outside the PBM’s corporate structure has full visibility into how pricing decisions are made or how dollars ultimately flow.

Regulators have begun to take notice. Congressional committees, state attorneys general, and oversight agencies have all raised questions about PBM practices, including rebate structures, spread pricing, and affiliated entities. While enforcement actions and investigations remain ongoing, the trend is clear: PBMs are no longer operating in a regulatory vacuum. The creation of PBM-affiliated GPOs may prove to be a tipping point that accelerates broader reform efforts, particularly if policymakers conclude that these entities exist primarily to obscure revenue rather than create measurable value.

For plan sponsors negotiating PBM agreements today, the practical implications are immediate. It is no longer sufficient to ask whether rebates are passed through. Contracts must define, with precision, what constitutes a rebate, what manufacturer payments are excluded and how affiliate entities are compensated. Audit rights must extend beyond the PBM itself and into affiliated organizations that receive drug-related revenue. Without these protections, plan sponsors risk signing agreements that look favorable on paper but fail to deliver meaningful cost control in practice.

For pharmacies, the message is equally direct. PBMs increasingly function as de facto regulators, enforcing compliance standards through audits, reimbursement policies and network participation rules. Understanding the broader financial incentives driving PBM behavior is essential to navigating audits, contesting recoupments and protecting network status. Pharmacies that treat PBM actions as isolated operational issues, rather than as manifestations of a larger economic structure, do so at their peril.

The PBM industry often responds to criticism by arguing that complexity is unavoidable and that intermediary leverage is necessary to counterbalance pharmaceutical manufacturers. There is truth to the notion that drug pricing is complicated and that no single reform will solve every problem. But complexity should not be a shield against accountability. If PBM-affiliated GPOs are delivering genuine value, that value should be demonstrable, transparent and contractually disclosed. If they exist primarily to recharacterize revenue, stakeholders are entitled to question their legitimacy.

The path forward does not require dismantling the pharmacy benefit system overnight. It requires a return to first principles: transparency, alignment of incentives and accountability. Employers, pharmacies and policymakers must insist on structures that reward actual cost savings rather than financial engineering. PBMs that embrace that approach will remain viable partners. Those that rely on opacity and affiliate arbitrage will increasingly find themselves under scrutiny.

The emergence of PBM GPOs is not an isolated development. It is the latest chapter in a long pattern of consolidation and revenue optimization that has steadily distanced PBMs from their original mission. Whether this chapter leads to meaningful reform or deeper entrenchment will depend on how forcefully stakeholders demand clarity. The tools exist. The question is whether they will be used.