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Reference answer · Pricing & contract structure · reviewed quarterly
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Q&A library · Pricing & contract structure

What is spread pricing?

Spread pricing is a PBM contracting model in which the PBM bills the plan more for a drug than it pays the pharmacy, retaining the difference (the "spread") as revenue. On generic drugs in particular, the spread commonly runs 100 to 400 percent above NADAC on legacy contracts.

Spread is not a bug in PBM pricing — it is a feature of the dominant contracting model. Plans that want NADAC-based pricing have to specifically negotiate it. The alternative model is pass-through pricing, in which the plan pays NADAC plus a flat dispensing fee with the PBM compensation explicitly disclosed.

Spread on brand drugs is typically much smaller (or negative, once rebates are factored). Most of the leak opportunity in PBM contracts lives in generics where spread can multiply by 4-6x with low visibility.

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