A vial of Humalog insulin cost $21 on a pharmacy shelf in 1999. Same molecule, same maker: $274 by 2017. The contract between the buyer and the middleman is where the price moved.

"Outsource what is not your core competency." You have heard it in boardrooms, at conferences, from consultants billing by the hour. It sounds right. It is not.

The Federal Trade Commission, in September 2024, sued the three largest pharmacy benefit managers in the country for unfair rebating. Those three firms control roughly 80% of all prescriptions filled in the United States. The FTC gave the practice a name: "chase-the-rebate."

Employers hired PBMs to negotiate drug prices on their behalf. The pitch was simple: we handle the hard part so you do not have to. But the PBMs did not push for lower prices. They pushed for higher rebates on higher list prices. The bigger the list price, the bigger the rebate. The bigger the rebate, the bigger the PBM's cut.

When lower-cost insulins came to market, the PBMs excluded them. They kept the high-price versions on their approved drug lists because those versions paid more in rebates. The middleman chose the more expensive drug because it paid better.

Between 2017 and 2022, the three largest PBMs pulled an estimated $7.3 billion in spread pricing income on just 51 specialty generic drugs. Spread pricing works like this: the PBM charges the health plan one price, pays the pharmacy a lower price, and keeps the gap. Most plan sponsors sign the contract once and never read the pricing terms again until renewal.

Two federal settlements put a price tag on what that gap cost. Express Scripts settled for terms that project up to $7 billion in savings over ten years. Caremark followed at up to $13 billion. Twenty billion dollars in combined projected savings. That is not a rounding error. That is the cost of a pay model that worked as designed, against the people who paid for it.

Every one of those plan sponsors thought they had hired an expert to lower their costs. I have sat across from vendors who made their value sound just as airtight. The numbers were polished. The promises were specific. The fee structure was the one part I did not question. Most people in this position make that mistake.

The advice did not fail people. It failed the system they were trying to run.

The problem is not that these employers outsourced. The problem is that outsourcing replaced oversight. There is a name for this in the literature: the principal-agent problem. When you pay a vendor whose income rises with the price they are supposed to bring down, the misalignment is in the contract itself.

The vendor is not broken. The incentive is working exactly as designed. It is just not designed to serve you.

This is not limited to pharmacy benefits.

The better principle is short: never sign a contract where your vendor profits from your cost going up. Once that is clear, three moves follow from it.

Pull every active vendor contract. Read the section on fees and commissions. Ask one question: does this vendor earn more when my cost goes up?

That question is harder to answer than it looks. Most fee models bury the link between your cost and the vendor's pay inside layers of defined terms.

A new federal law, the Consolidated Appropriations Act of 2026, now requires 100% rebate pass-through for employer-sponsored health plans. Congress wrote that law because the gap between what employers paid and what vendors kept had grown too wide to ignore. Apply the same logic to every vendor deal: if a vendor collects a discount or rebate in your name, the contract should state in plain terms that all of it flows back to you.

Employers who switched to transparent PBM models saw 15% to 25% savings in the first year. Those savings came from removing the spread, not from finding a better vendor. Pick one contract per quarter, pull the invoices, and compare what you paid against an independent benchmark for the same service.

Running these three moves for two quarters does something the advice never did:

You see which vendors sell a service and which sell access to the spread. You see which contracts protect the buyer and which protect the fee. You see where the real cost of "outsourcing" hid for years. Not in the service. In the pay model behind it.

At the end of each quarter, ask three things.

→ Which vendor relationship moved a cost number in my favor?

→ Which one looked like it was working but left no trace in the accounting?

→ Which contract has a compensation clause I still have not read?

That is the difference between advice that sounds right and a system that proves itself.

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The vial of Humalog still holds the same molecule it held in 1999. The platitude is not wrong about delegation. It is wrong about trust without structure.