In the spread pricing model, what key consideration limits the plan sponsor's liability?

In the spread pricing model, the plan sponsor's liability is primarily limited by guarantees set at market competitive rates. This approach means that the contractual terms ensure that the plan sponsor will pay a preset, competitive amount for the medications, regardless of the actual costs incurred by the pharmacy benefits manager (PBM). Since the rates are established based on market benchmarks, this creates a structure where costs are predictable and manageable for the plan sponsor, reducing the financial risk associated with volatile drug pricing.

The focus on competitive rates fosters a scenario where the plan sponsor can plan their budgets more effectively, knowing what to expect in terms of drug expenses. This predictability makes the financial management of the pharmacy benefit more stable, thereby limiting the potential for unexpected financial burdens. In contrast, other aspects such as lower drug prices, transparency in operations, and performance-based contracts, while beneficial in various contexts, do not specifically address the foundational aspect of liability limitation in the spread pricing framework.