A physician writes a prescription believing the clinical decision has been made. In reality, another decision-making process is just beginning.
Between the prescription and the patient sits an increasingly powerful infrastructure of pharmacy benefit managers, insurers, formularies, rebate agreements, pharmacy networks, prior authorization rules, and specialty pharmacies. Most physicians see only fragments of this system. Patients usually understand even less.
The result is a peculiar form of American medicine: The person making the clinical decision often does not know what the treatment will actually cost, whether the patient’s insurer will cover it, which pharmacy will be allowed to dispense it, or whether another drug generates stronger financial incentives somewhere in the system.
The prescription is clinical. What happens to it afterward is increasingly economic.
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Pharmacy benefit managers (PBMs) were created for legitimate reasons. They process pharmacy claims, negotiate with manufacturers, manage formularies, establish pharmacy networks, and use purchasing power to obtain discounts. In principle, aggregation should produce lower costs and more efficient administration. But aggregation has also produced extraordinary concentration.
A new American Medical Association (AMA) analysis found that the four largest PBMs controlled 75 percent of the national PBM market in 2024, up from 70 percent two years earlier. Ninety-four percent of local PBM markets were classified as highly concentrated. The AMA also found that each of the 10 largest PBMs shared ownership with a health insurer.
That vertical integration changes the economic structure. The same corporate family can participate in insurance, benefit management, pharmacy services, and specialty-drug distribution. Each component has its own revenue streams and incentives, while the physician and patient see only the final coverage decision and the price at the counter.
The Federal Trade Commission (FTC) has raised even sharper questions. In a 2025 report examining 51 specialty generic drugs, FTC staff found that the three largest PBMs and their affiliated pharmacies generated more than $7.3 billion in dispensing revenue above estimated acquisition costs from 2017 through 2022. The report also documented markups reaching hundreds or thousands of percent on some specialty generics and found that affiliated pharmacies often received higher reimbursement than unaffiliated pharmacies.
PBMs dispute many criticisms of their industry and argue that manufacturer list prices, hospital markups, insurance design, and other components of the drug supply chain also drive costs. That is an important point. Prescription drug pricing is not the product of one villain. But complexity does not excuse opacity.
For physicians, the problem becomes practical very quickly. A doctor chooses a medication because it fits the patient’s condition, history, side-effect profile, and therapeutic needs. The insurer’s formulary prefers another drug. Prior authorization follows. The office spends time documenting why the original prescription is necessary. The patient discovers that the copay is unaffordable or that the prescription must be filled through a particular specialty pharmacy.
The doctor prescribed one treatment. The financing system effectively prescribed another.
There are alternatives beginning to test whether all of this complexity is necessary. Mark Cuban’s Cost Plus Drugs is the most visible example. Its basic pricing model is unusually simple: Disclose the acquisition cost, add a 15 percent markup and pharmacy fee, then show the patient the price.
The company does not solve the entire prescription drug problem. Its reach remains more limited for branded and specialty drugs, where manufacturer pricing, patents, rebates, and formulary access become much more important. Cuban himself acknowledged these limitations in a 2026 JAMA interview.
But the significance of the model is larger than one company. It demonstrates what happens when the price is visible. A patient can see what the drug costs, what the intermediary adds, and what the final price becomes. That sounds unremarkable. In most industries, it is. In prescription drugs, it is almost revolutionary.
This raises an uncomfortable question. If a transparent pricing model works for hundreds of medications, why is the conventional system built around prices that physicians, patients, and often employers cannot readily understand?
The answer is not to eliminate every intermediary. PBMs perform functions that someone has to perform. Large purchasers also possess negotiating leverage that individual physicians, pharmacies, and patients do not have.
The better question is what kind of middleman the health care system actually needs. We need PBMs whose compensation is visible to the organizations hiring them. Rebates and discounts should be traceable. Employers and health plans should know the acquisition economics behind the drugs they purchase and how much of any negotiated savings reaches patients. Financial incentives favoring affiliated pharmacies should be disclosed. Patients should be told when paying cash costs less than using insurance.
Physicians also need better information at the point of prescribing. A modern prescribing system should show the patient’s actual out-of-pocket cost, covered therapeutic alternatives, prior authorization requirements, and lower-cost options before the prescription is sent.
That transforms the conversation in the examination room. Instead of discovering three days later that a $40 prescription costs the patient $400, physician and patient can make the clinical and economic decision together.
There is also a larger lesson here for medicine. Health care increasingly separates the person making the clinical decision from the person controlling the economic consequences of that decision. We see it in prior authorization. We see it in hospital contracting. We see it in drug benefits. Every additional layer creates another opportunity for legitimate coordination. It also creates another opportunity for incentives to diverge from patient care.
The current PBM debate therefore is not simply about whether middlemen make too much money. It is about whether the structure connecting a physician’s prescription to the patient’s medication is transparent enough for anyone outside that structure to understand. A market does not function well when the buyer, the prescriber, and the patient cannot see the real price.
Physicians do not need to become pharmacy-benefit economists. But they should care deeply about a system that routinely intervenes between their clinical judgment and their patients.
The prescription pad should not be the beginning of an economic obstacle course.
Matt Hasan is an economist, AI strategist, and founder of aiRESULTS. He advises health systems, payers, and life sciences organizations on the strategic implications of artificial intelligence, digital transformation, and emerging technologies. Over a career spanning more than four decades, he has held leadership and advisory roles with organizations including AT&T, IBM, Deloitte, Capgemini, and Citigroup, and previously served on the faculty of New York University’s Stern School of Business.
Dr. Hasan’s work focuses on the intersection of technology, institutions, and human decision making, with particular emphasis on how AI is reshaping medicine, governance, leadership, and professional practice. He is the founder of The AI Humanist Movement and an advocate for Human-AI Synergy, a framework that views AI not merely as a tool, but as a cognitive partner capable of extending human capabilities.
His writing includes “A Profession at the AI Frontier: Medicine Must Reinvent Itself or Cede Ground,” published in Health Affairs Forefront. He shares updates on LinkedIn and Medium.
