Under which type of contract do Pharmacy Benefit Managers receive payment for administrative services without assuming drug cost risk?

In the context of Pharmacy Benefit Managers (PBMs), a Fee-for-Service model is where PBMs are compensated primarily for the administrative services they provide, such as managing pharmacy benefits and processing claims. This model emphasizes that PBMs receive payments based on the specific services rendered, rather than taking on the financial risk associated with the actual costs of the medications themselves.

In this arrangement, PBMs do not bear the responsibility for the cost of medications—they merely facilitate the delivery and management of those services. The payment structure is straightforward: PBMs charge fees for their administrative tasks and services, which can include negotiating drug prices, managing formularies, and other related activities.

This differentiates the Fee-for-Service model from other options, such as Shared Savings, Capitated, and No Risk models, which each reflect different financial relationships and risk-sharing arrangements between healthcare providers and payers. The Fee-for-Service model's structure enables PBMs to operate without the added financial burden of assuming drug cost risk, focusing instead on efficiency and service delivery.