Spread pricing model fully explained

Why Choose Spread Pricing in Contracts with PBMs?

First, it’s important to highlight that 33 percent of labor unions, and 26 percent of health plans choose this risk-mitigation pricing model, according to a 2023 PSG survey.

Spread pricing models are called risk mitigation models for a reason. Here’s why some businesses choose to use spread pricing: Different pharmacies charge different amounts for filling the same prescription. For example, prices for a drug can vary based on whether a pharmacy is in or out of a consumer’s network or whether the pharmacy purchases more or less expensive versions of a multi-source drug. To address price variation, employers or health plans may prefer that the pharmacy benefit company assume the risk when patients choose costlier pharmacies to fill their prescriptions. In a spread pricing model, the payer agrees to pay a set reimbursement for each drug to the pharmacy benefit company, regardless of which pharmacy the patient used. If the pharmacy charges the pharmacy benefit company more than the rate agreed to between the payer and the pharmacy benefit company, the pharmacy benefit company covers that difference and takes a loss. Or, if the pharmacy charges less, the pharmacy benefit company earns a margin (i.e., the spread), which it keeps as a form of compensation from the payer.  

The plan sponsor is guaranteed a fixed cost for a prescription drug, which provides them with financial certainty and pricing predictability.

Bills that ban spread pricing, which small organizations and startups often choose because the PBMs take on the additional risk for themselves, take away choices. So, there is a choice in the marketplace between spread pricing and pass through, every company has it.  Some labor unions like this choice… 

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