The skinny on spread pricing

Express Scripts negotiates discounts with retail pharmacies and other providers. Clients can choose spread pricing to help pay for the services Express Scripts provides

Some clients choose a traditional pricing model known as spread pricing. This model works for many clients looking to mitigate risk and keep their monthly drug spend predictable. Other clients opt to pay what the PBM pays the pharmacy for each prescription, which is known as pass through pricing.

With spread pricing arrangements, the PBM and client agree to a guaranteed rate for prescriptions. If the PBM cannot negotiate a rate that is higher than the guaranteed amount set with the client, the PBM covers the costs. This means payers are protected from uncertainty around prescription costs.

Clients choose how they want to structure their benefits – to best balance cost, coverage and the needs of their employees and populations – and select a pricing model that works best for their needs.

Express Scripts clients have the option to choose either a spread or a pass through pricing model or are able to combine these options, depending on their needs.

How Spread Pricing Works

Spread refers to the difference between the Express Scripts-negotiated price paid to network pharmacies and the price paid by a client to us.

We protect our clients from risk. Whether our negotiations with pharmacies deliver a higher or lower prescription drug discount than what we originally agreed upon with our clients – our clients’ costs stay the same.

When the net price is less than the price paid by the client, PBMs retain the difference, or the “spread.”

When the net price is more than the price paid by the client, PBMs must assume the risk and pay the difference, or the “spread.”

Fully transparent view. Clients receive cost details for each pharmacy claim – and can audit network claims annually.

Administrative services. Clients may elect to utilize a spread pricing model to offset or forgo the cost of administrative services that Express Scripts provides.

Contract terms. A client’s typical contract term is three years with the opportunity to renegotiate pricing based on changes in the market environment.

Full transparency provided around the spread pricing model

Clients have the right to audit our network claims annually and regularly receive claim level cost detail from Express Scripts at no additional charge. Additionally, beginning with plan year 2023, Express Scripts will provide clients enhanced financial and fee disclosure regarding their spread pricing arrangements for Form 5500 reporting and other plan administration functions.

Spread pricing is used in many industries – from automotive to retail

Spread pricing is not unique to Express Scripts or PBMs. In fact, spread pricing is used across the prescription drug supply chain – from manufacturers to pharmacies – and across the broader health care industry. It is also used in many other industries from retail to automotive to food.