From Neutral to Revenue-Driven: How PBM Incentives Are Changing Hospice Pharmacy

Not long ago, hospice pharmacy benefits were pretty straightforward. A benefit manager processed claims, kept a hospice-friendly drug list (a formulary), and paid local pharmacies fairly. There were no rebates, no “spread pricing,” and no in-house pharmacy channel built into the contract. The goal was simple: support care.

That setup is much less common now. Today, many PBM (pharmacy benefit manager) models are built to earn money at several points in the process: which drugs are preferred, what rules control usage, where prescriptions are filled, and how prices are shown (or not shown) later. What changed isn’t just the cost. It’s how the system behaves day to day. And in hospice, where timing and trust matter, those changes show up fast.

The Incentives That Changed the Work

Most of what’s happening in hospice PBMs comes back to three incentive patterns. They aren’t abstract. Hospices feel them in budgets, workflows, and late-night calls.

1) Keeping rebates

Some drug companies pay rebates based on which drugs get used. When a PBM can keep part of those rebates, the formulary isn’t only about what’s best clinically or operationally. Drugs that generate more rebate value can get quietly favored, even when a lower-cost option would work just as well.

Over time, that can raise drug spend and work against deprescribing, which many hospice teams are actively trying to do.

2) Spread pricing

With spread pricing, the hospice gets billed one amount, but the pharmacy is paid a different amount. The PBM keeps the difference as profit. The problem is that the hospice often can’t see the details line by line.

When it’s hard to compare “what we were billed” versus “what the pharmacy was paid,” hospices lose basic control:

• Audits get harder.
• Negotiations get weaker.
• It becomes difficult to find which drug categories are driving avoidable cost.

Governance breaks down because the data needed to manage the benefit isn’t available.

3) Ownership and steering

Some PBMs also own pharmacies or have preferred dispensing channels. When that happens, routing prescriptions into their own channel becomes a business goal.

It may be explained as efficiency or consistency. But the pressure is still there: move volume away from local pharmacies, even when local pharmacies are better positioned for urgent starts, after-hours needs, or tricky exceptions.

Two Common Hospice PBM Operating Models

Most large hospice PBM arrangements today fall into two basic models. You don’t need brand names to recognize them.

Model 1: PBM plus a local or regional dispensing footprint

In this model, the PBM also runs (or closely controls) a network of hospice-focused pharmacies in many markets. The promise is speed and control: same-day delivery in some areas, integrated clinical support, and fewer handoffs because the PBM and pharmacy are part of the same organization.

There are real upsides:

• Fewer vendors can mean fewer dropped balls.
• Service can be consistent in areas where the pharmacy footprint is strong.

But the tradeoff is neutrality. If the same company manages the benefit and earns money from dispensing, decisions about routing and utilization are no longer fully independent. Billing may be bundled, which can make it harder for a hospice to confirm true net cost or verify that cost controls are being pushed as hard as they would be internally.

What’s promoted: speed, consistency, hospice focus, fewer vendors.
What’s usually not said plainly: when the PBM profits from drug flow, it’s harder to separate good service decisions from volume capture, and harder for hospices to audit with confidence.

Model 2: Centralized fulfillment at scale (shipping-based)

This model relies on central fill facilities and shipping, often supported by broader logistics and technology platforms. The pitch is standardization, wide geographic reach, and efficiency.

In practice, centralized fulfillment often makes “tomorrow” the default. That can work for stable maintenance meds. It often doesn’t match hospice reality: late admissions, Friday night symptom changes, or holiday weekends that don’t care about shipping cutoffs.

Local pharmacies are usually treated as the backup plan, not the core plan. And when a local fill is allowed, it can come with extra steps: authorization, documentation, and escalation. Those steps don’t show up as a line item on the invoice, but they use real resources: nurse time, on-call bandwidth, and operational goodwill.

What’s promoted: reach, technology, predictable processes.
What’s usually not said plainly: bedside care doesn’t run on shipping windows, and exceptions quietly shift work onto clinical teams.

The “Edge Case” Problem No One Owns

Centralized models often say local pharmacies are used for “edge cases.” But what counts as an edge case in hospice is larger than people admit.

Here’s what’s happened over the last decade:

• Local pharmacies have lost volume as dispensing is pulled into owned or preferred channels.
• Reimbursement has tightened.
• Audit risk has increased.
• Payment terms have become harder to predict.

Then, after years of being deprioritized, those same pharmacies are asked to handle the hardest work: stat starts, after-hours fills, controlled substances, and last-minute changes.

This creates predictable behavior. Not because pharmacists don’t care, but because the economics taught them not to overextend. Responsiveness becomes inconsistent and dependent on relationships, not something the system guarantees.

What this looks like inside a hospice:

• Pharmacies experience the model as extractive, not collaborative.
• Hospices get uneven emergency responses.
• Nurses end up managing tension between a frustrated local pharmacy and a benefit structure that treats local service as overflow capacity.

The result isn’t only delay. It’s community conflict that erodes trust across the care continuum.

Three Risks Hospices Keep Running Into

When a hospice PBM shifts from neutral administrator to revenue-driven operator, three risks tend to show up again and again.

1) Misaligned incentives

If a PBM makes more money when drug spend rises, utilization increases, or dispensing is routed internally, the system isn’t naturally aligned with hospice goals. Even subtle steering can weaken formulary discipline, deprescribing plans, and budget predictability.

2) Obscured pricing

Bundled billing and limited visibility make it hard to answer basic questions: Where is the money going? What are we paying for the drug versus the administration? Without clean paid-versus-billed data, finance, pharmacy, and operations lose a shared set of facts.

3) Bedside delays

Hospice is urgent. When symptom relief is delayed because fulfillment is centralized or local partners are disengaged, the cost shows up where it matters most. Families remember the wait. Clinicians carry the frustration. No report later makes that moment feel better.

Where Wise Fits After 22 Years Serving Hospice

Wise has worked in hospice pharmacy for 22 years. That history shapes how we operate.

We’ve watched pharmacy benefits shift from a service layer into a profit layer, and we’ve watched what that shift does to care delivery and local relationships. Hospice pharmacy is not simple. But incentives should be clean enough that the work can function the way hospice needs it to.

We don’t try to get between a hospice and its pharmacies. We support that partnership, because hospice pharmacy works best when everyone trusts the rules.

That approach shows up in a few clear choices:

• We don’t benefit when drug spend increases. With pass-through economics, incentives stay aligned. Cost control, deprescribing, and generic substitution don’t compete against revenue goals.
• We don’t treat local pharmacies as overflow. Local pharmacies are part of the clinical infrastructure. If they’re expected to respond at 2 a.m., the model has to respect their operational and financial reality.
• We make the money visible. Separating drug cost from administrative fees supports real governance. Transparency isn’t about suspicion. It’s about coordination across clinical, operational, and financial leaders.

If you’ve worked in hospice long enough, you know what we’re not trying to do. We’re not engineering margin through fine print. We’re not capturing dispensing volume. We’re not shifting the burden onto nurses through exception workflows that look efficient on paper.

We’re trying to protect what makes hospice pharmacy work: fast access at the bedside, predictable costs, and durable local partnerships that hold up when care gets urgent.

The Bottom Line

Hospice PBM models work best when incentives match hospice reality. Models built on rebates, spread pricing, and ownership can function, but they create predictable conflicts and hidden workflow costs. Hospices end up paying for those costs through margin, staff time, and patient experience.

Transparency doesn’t solve every constraint in hospice care. But it removes a major one: having to guess whether a benefit partner is optimizing for care delivery or for revenue hidden inside the benefit.

For hospices navigating these choices today, the key question isn’t which platform has the most features. It’s which model stays aligned when it matters most: at the bedside, in the community, and after hours.