The FTC Just Settled With Express Scripts Over Insulin Pricing. Does Your Own Contract Have the Same Problem?

In February 2026, the Federal Trade Commission reached a settlement with Express Scripts over allegations that the PBM steered insulin formulary placement toward whichever manufacturer offered the largest rebate off list price, rather than the lowest net cost, a practice that, according to the FTC's allegations, contributed to inflated insulin list prices industry-wide over several years. It's a significant enforcement action, and it's tempting for employers who don't use Express Scripts to read it as someone else's problem, resolved by someone else's regulator. That reading misses what actually matters here. The settlement addresses one PBM's conduct in one drug class over a specific period. It says nothing about whether your PBM, in your contract, right now, has a version of the same mechanism running quietly in a different drug class.

The Misconception

Employers tend to think about spread pricing narrowly, as the gap between what a PBM charges the plan for a drug and what it reimburses the pharmacy, a single number on a single claim that a good contract simply prohibits. That definition made sense for an earlier generation of PBM contracts, and plenty of employers now have "spread pricing prohibited" language and reasonably consider the issue closed. But the Express Scripts allegations describe something structurally different: not a markup on an individual transaction, but a formulary placement decision optimized for rebate size rather than net cost, which produces the same financial effect as spread pricing, the plan paying more than it needed to, without ever showing up as a spread on any claim. A contract can prohibit spread pricing in its narrow, transactional sense and still permit rebate-optimized formulary steering, because those are two different clauses, and most employer contracts only address the first one explicitly.

Why This Stays Hidden

Spread pricing in its classic form is detectable, in principle, by comparing what a plan was charged against pharmacy reimbursement data, difficult without the right audit rights, but at least conceptually a single comparison. Rebate-optimized formulary steering is harder to see because it requires comparing a counterfactual: what would formulary placement have looked like if optimized for net cost, versus what it actually looked like. That comparison requires access to competing rebate offers across manufacturers in a therapeutic class, information PBMs generally treat as proprietary and rarely disclose even under existing transparency commitments. Most employer benefits teams don't have the specialized pharmacy economics expertise or the leverage to request that comparison, and most standard PBM contracts don't guarantee the right to see it.

A Framework for Auditing Your Own Contract

Five checkpoints, applied to your current PBM contract and claims data, will tell you whether your plan has exposure to the same category of issue the FTC identified at Express Scripts.

1. Compare your invoiced ingredient cost against an independent benchmark on your top 20 drugs by spend.

Pull your actual invoiced cost for your twenty highest-spend drugs and compare against NADAC, the National Average Drug Acquisition Cost benchmark published by CMS, or your MAC list if you're auditing a generic. A pattern of invoiced costs running consistently above benchmark on brand or specialty drugs, particularly in categories with multiple competing manufacturers, is the same shape of finding the FTC identified, formulary and pricing decisions that don't track the lowest available net cost.

2. Verify your generic effective rate guarantee against what actually happened.

Most PBM contracts include a generic effective rate, or GER, guarantee, a target average discount off AWP across your generic claims. PBMs are contractually held to the aggregate guarantee, but individual claims can vary widely around it, and a PBM under margin pressure has room to manage that variance in its own favor as long as the aggregate number is met. Request the claim-level detail behind your GER calculation, not just the summary percentage, and confirm the aggregate figure isn't masking a distribution that consistently costs your plan more on the drugs you fill most.

3. Confirm your rebate definition captures all manufacturer payments, not a narrow subset.

As with the rebate pass-through provisions in the 2026 federal reforms, the value of a "100% rebate pass-through" clause depends entirely on how broadly rebate is defined in your specific contract. Manufacturer administrative fees, price protection payments tied to list price increases, and market share incentive payments are all forms of manufacturer-to-PBM compensation that may or may not be captured under your contract's rebate definition. If they're excluded, they can be retained by the PBM without violating your pass-through guarantee.

4. Verify your audit rights extend to claim-level data, not just aggregated reporting.

An annual or semiannual summary report, even a detailed one, is not the same as an audit right. Confirm your contract allows you, or a third-party auditor you select, to review underlying claim-level transaction data, including pharmacy reimbursement and manufacturer payment detail, rather than only PBM-prepared summaries. The Express Scripts allegations came to light through exactly this kind of granular, claim-level scrutiny, not from reviewing summary reports.

5. Check the true-up mechanics on your quarterly rebate payments.

Confirm whether your rebate payments are calculated and reconciled against actual utilization each quarter, or whether they're paid against an estimate and trued up annually. A contract that pays quarterly but reconciles annually can create a meaningful gap between what you're told you received and what you're contractually owed, particularly in a year with significant utilization shifts in a category like GLP-1s or specialty biologics.

What This Looks Like in Practice

Illustratively, a plan auditing its top 20 drugs by spend might find that three or four specialty products are invoiced at 8 to 12% above the relevant benchmark, concentrated in classes where multiple manufacturers compete for formulary position, the exact dynamic the FTC described in insulin. On a plan with several million dollars in annual specialty spend, that gap alone can represent a six-figure annual cost that no single contract clause technically violates, because the contract never defined "lowest net cost" as the standard for formulary placement in the first place.

Connecting This to Renewal and Negotiation

Every one of these five checkpoints is also renewal language. If your audit turns up findings, the fix isn't a one-time credit from your PBM, it's tightening the underlying contract provisions: a broadened rebate definition, an explicit net-cost standard for formulary placement decisions, expanded claim-level audit rights, and quarterly true-up requirements. Given that PBMs industry-wide are already rewriting standard contract language in response to the CAA 2026 reforms and the increased regulatory scrutiny following the Express Scripts settlement, this is a low-friction moment to request stronger terms, since your PBM's contracting team is revising templates regardless.

Actions to Take This Quarter

Request claim-level detail, not summary reports, for your top 20 drugs by spend, and compare invoiced cost against NADAC or your MAC list. Ask your PBM, in writing, for the specific definition of "rebate" in your contract and compare it against the broader statutory definition in CAA 2026. Confirm your audit rights explicitly include third-party access to claim-level data. And if you haven't had an independent pharmacy benefit audit in the last contract cycle, treat this settlement as the occasion to schedule one, rather than waiting for your own plan's version of this story to surface on its own.

Key Takeaways

The Express Scripts settlement is valuable to employers not because of what it says about Express Scripts, but because of what it reveals about how rebate-driven formulary economics can produce spread-pricing-like costs without ever technically violating a narrowly written spread pricing prohibition. The employers best positioned heading into 2026 renewals aren't the ones reassured that their PBM wasn't named in an enforcement action, they're the ones who used the enforcement action as a prompt to audit their own contract for the same structural gap.