In which pricing model does the PBM carry little risk?

The Pass-Through Pricing Model involves a structure where the Pharmacy Benefit Manager (PBM) directly passes on the costs of medications to the plan sponsor or employer without marking up the prices. In this scenario, the PBM does not retain a margin on drug pricing and typically receives a fixed administrative fee for its services rather than profiting from the price of the drugs themselves. Consequently, the PBM carries little financial risk because it is not affected by fluctuations in drug costs; any changes in medication costs are directly transferred to the plan sponsor, ensuring that the PBM's earnings remain stable regardless of drug price variations.

In contrast, other pricing models may expose the PBM to greater risk. For example, in the Capitated Pricing Model, the PBM receives a predetermined amount per member regardless of the actual services used, which can lead to financial losses if the care costs exceed this set amount. The Fee-for-Service Pricing Model typically involves billing based on services rendered, which can lead to unpredictable costs that the PBM must manage. The Shared Savings Model incentivizes cost-effective care, but it ties the PBM's compensation to achieving specific savings targets, which introduces variability and risk depending on the outcomes of care management initiatives.