Pharmacy Benefit Managers: How We Got Here, Why It’s Failing Consumers, and How CareAlly Can Help

Prescription drugs touch nearly every American household, yet the process behind what we pay for them is one of the least understood in healthcare. A medication’s price can vary by hundreds of dollars depending on who is paying, which pharmacy you visit, or what insurance plan you have. Sitting in the middle are the pharmacy benefit managers, or PBMs. They were originally created to help patients and payers save money. Over time, though, the system flipped. The very middlemen meant to create order have become the primary source of complexity and confusion.

Recent moves by The Cigna Group, through its PBM arm Express Scripts, to eliminate rebates and introduce a cost-plus model show how much pressure is building to reform this system. Fixing PBM economics will take years, but technology platforms like CareAlly can play a major role right now. They can restore visibility, align incentives, and make sure that savings actually reach the people who need them most.

PBM's and why they failed us

How PBMs Started and Why They Were Needed

Pharmacy Benefit Managers first appeared in the 1980s and 1990s, when prescription use was rising quickly and health plans were struggling to manage pharmacy claims. Every plan had to decide which drugs were covered, how much to pay pharmacies, how to collect manufacturer rebates, and how to control utilization.

PBMs offered to handle these functions on behalf of payers and employers. They promised to process claims, negotiate bulk discounts with manufacturers, and design formularies that defined which drugs were preferred. In theory, this centralization would make the system more efficient. Instead of every employer negotiating separately with dozens of drug companies, PBMs could pool volume, secure larger discounts, and pass those savings along.

For a while, that promise seemed to work. PBMs helped automate claims, standardize drug benefits, and encourage generic use through mail-order programs. Costs stabilized. It looked like a smart market solution to a growing administrative challenge.

How PBMs Shifted from Cost Managers to Profit Engines

Over time, the incentives changed. Drug manufacturers discovered that they could pay PBMs rebates to secure better placement on formularies. The higher the list price of a drug, the larger the rebate that could be negotiated, and the more the PBM could retain. Instead of lowering prices, the system began to reward higher list prices and bigger back-end payments.

Three distortions followed.

First, rebate-driven inflation.

Manufacturers raised list prices so that after rebates were paid, their net revenue would remain strong. A drug with a $600 list price might have a $300 rebate to the PBM, meaning a $300 net sale, but the patient’s copay or coinsurance was still based on the $600 price. The PBM and plan shared in the rebate, while the patient paid based on an inflated figure.

Second, opaque contracting and spread pricing.

PBMs negotiated one reimbursement rate with pharmacies and charged plan sponsors a higher one, keeping the difference as profit. Independent pharmacies with limited leverage were hit hardest, often paid near their actual acquisition cost while PBMs pocketed the spread.

Third, misaligned incentives.

Since PBMs earned more when list prices rose, they had little motivation to promote lower-cost drugs or biosimilars. Complexity became profitable. Each new fee or pricing layer justified another administrative charge. Even large employers struggled to determine what they were truly paying for medications.

The result was predictable. Out-of-pocket costs rose, deductibles expanded, and rebate savings rarely reached consumers. Patients with identical prescriptions could face drastically different costs depending on plan design. Physicians and pharmacists saw a surge in paperwork as prior authorizations multiplied. Employers and payers found that forecasting drug spend was almost impossible because true net prices were hidden in confidential contracts.

The Real Impact on Patients and Clinicians

Every layer of PBM complexity creates friction at the point of care. Patients delay fills or skip medications when they see the price at the pharmacy counter. Providers spend hours chasing prior authorizations that have more to do with rebate structure than with medical necessity.

Medication non-adherence due to cost contributes to an estimated 125,000 preventable deaths each year in the United States and billions of dollars in avoidable healthcare spending. Yet the system built to control drug costs often increases them by making pricing nearly impossible to understand.

For clinicians in skilled nursing facilities, senior living communities, and home health settings—the very environments CareAlly serves—the problem is amplified. Residents on fixed incomes or with multiple chronic conditions are the most likely to skip refills when pharmacy bills fluctuate. Staff members lose valuable time trying to navigate formularies instead of focusing on care.

Why Cigna’s Announcement Matters

In October 2025, The Cigna Group announced that Express Scripts would begin phasing out the traditional rebate model. For Cigna’s fully insured health plans, the rebate-free structure will start in 2027. For PBM clients, it will become the standard offering in 2028, although clients can still choose rebate arrangements if they wish.

Under this new model, negotiated discounts will be provided upfront at the point of sale rather than rebated months later. Cigna expects that brand-name drugs could cost about 30 percent less for members who pay full price, such as those with high-deductible plans. The company will also move to a cost-plus reimbursement system for pharmacies beginning in 2026. Pharmacies will be paid their actual acquisition cost, plus a dispensing fee and possible reimbursement for clinical services.

Cigna plans to add technology that automatically identifies the lowest available price at the pharmacy counter, whether that is the negotiated PBM rate, a cash discount, or a manufacturer’s direct price.

This shift marks a philosophical change from hidden rebate deals to upfront transparency. It is an admission that the old model is losing credibility with both the public and policymakers.

Even so, the change will take years to roll out. Many employers and PBM clients may choose to keep their existing contracts. The market will remain fragmented for some time, leaving patients and providers in limbo. That is where CareAlly can help bridge the gap.

How CareAlly Can Make Transparency Real

CareAlly was created to simplify complexity and unify data across healthcare workflows. In a world where drug pricing models are shifting, that mission becomes even more valuable. The platform can connect payers, pharmacies, providers, and patients, turning abstract policy changes into practical, real-time insights.

1. Cost transparency at the point of care

CareAlly can present price information directly in clinical workflows. When a clinician prescribes a medication, the system can display the current cash price, the negotiated PBM price, any generic or biosimilar alternatives, and the expected out-of-pocket cost for that member. Having this data during the care conversation allows for immediate, informed decisions instead of surprises at the pharmacy.

2. AI-driven adherence and risk detection

Because CareAlly already integrates clinical and behavioral data, it can identify patients most likely to miss doses due to cost. Those individuals can be automatically flagged for outreach. Care teams can then contact them proactively through digital reminders or follow-up calls before a refill is missed.

3. Pharmacy coordination and feedback loops

CareAlly can close the loop with pharmacy partners, confirming that patients received the lowest possible price at dispensing. If a resident paid full list price when a negotiated discount was available, the platform can trigger an alert for correction or education. This helps ensure that the savings promised by PBMs actually reach the consumer.

4. Integration with benefit design and measurement

As payers and employers move toward rebate-free models, CareAlly can help them measure results. Dashboards can track average cost per prescription, adherence rates linked to cost visibility, and changes in ER visits or readmissions. These metrics will show whether new PBM approaches are producing real savings or simply reshuffling margins.

5. Education and communication

Transparency only matters when people understand it. CareAlly can equip residents, caregivers, and care teams with simple explanations such as “Here is what will change in 2027” or “Ask your pharmacist if you are receiving the negotiated price.” Clear language builds trust and reduces confusion.

Building a New Model of Pharmacy-Care Integration

Cigna’s move is part of a broader national trend toward transparency. Other companies like Mark Cuban’s Cost Plus Drugs and Amazon Pharmacy are also challenging traditional PBMs with direct-to-consumer pricing. Yet most of these efforts remain disconnected from daily care delivery.

CareAlly’s orchestration model fills that gap. Instead of trying to replace PBMs or pharmacies, it connects them to the clinical workflow and creates a unified view of cost, adherence, and outcomes. Imagine a care team that can see not only which medications a resident takes, but also what those medications cost and whether price barriers are affecting adherence. A nurse can see if a patient has not refilled a prescription and instantly check whether cost is the reason. A payer can view pharmacy spending alongside adherence metrics and care outcomes. These connections make transparency actionable.

The Road Ahead

Rebate-free and cost-plus models are still in early stages. Implementation will be slow, and other PBMs will introduce their own versions. Simply changing pricing formulas will not be enough. Without visibility at the point of care and accountability for outcomes, the same problems could reappear under different names.

CareAlly can prevent that cycle by grounding transparency in workflow, data, and patient experience.

Workflow: make cost visibility part of every care interaction.

Data: measure adherence and savings in real time.

Experience: educate patients and families so they understand their options.

Technology alone will not fix PBMs, but technology that makes transparency practical can make the system far more humane.

Closing Thoughts

PBMs were created to simplify a chaotic market. Over the years, that complexity became their business model. The healthcare industry is now realizing that secrecy and affordability cannot coexist. Cigna’s announcement does not mark the end of PBMs, but it signals a clear demand for accountability and change.

For CareAlly and its partners across senior living, home health, and healthcare delivery, this moment is an opportunity to lead. By weaving pharmacy cost visibility and adherence support into everyday workflows, CareAlly can help clients deliver on the promise PBMs once made: affordable access to the medications that keep people well.

Real reform will not come from eliminating middlemen. It will come from connecting data, workflows, and incentives around the patient. That is the orchestration CareAlly provides and the kind of progress healthcare finally needs.