“Rebates, I’ll go out on a limb and say, they’re almost inherently evil... Your sickest employees are paying for that rebate.” - Steve Ditto
PBM rebates are sold as savings. Steve Ditto argues they do the opposite. Manufacturers pay for rebates by raising list prices, and members’ copays and deductibles are based on those inflated prices. The employer cashes the rebate check while its sickest members cover the cost.
Steve spent 30 years as a healthcare consultant before the wrong $100,000 infusion put him in the ICU and made him a patient advocate. He explains why buying drugs on a lowest-net-cost basis beats chasing rebates, why the PBM is the easiest place for a self-funded employer to start, what to ask about an advisor’s compensation, and how Nautilus Health Institute’s free model contract language and Contract X-Ray tool help plans get a better deal.
His new book, The Middleman’s Cut, is available on Amazon.
If you’re advising self-funded employers on pharmacy, this is the episode for you. Tune in.
Thank you to our 2026 sponsors!
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Chapters:
(00:00:00) Intro: Rebates Are Almost Inherently Evil
(00:00:16) From Consultant to Patient
(00:04:40) Jim, Maria, and Rationing Medications
(00:09:46) Why the Sickest Members Pay for Rebates
(00:17:09) Steve’s Path Through Healthcare Consulting
(00:19:40) Quality, Stop-Loss, and Specialty Drugs
(00:27:37) Nautilus and Free PBM Contract Tools
(00:32:54) Where Self-Funded Employers Should Start
(00:38:55) Direct Primary Care and Direct Contracting
(00:43:00) Navigation and the Right Diagnosis
(00:52:04) Are Carrier Networks Obsolete?
(00:56:51) Closing Thoughts
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@SelfFunded on YouTube for video versions of the podcast and much more - https://www.youtube.com/@SelfFunded
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Listen on Apple Podcasts - https://podcasts.apple.com/us/podcast/self-funded-with-spencer/id1566182286
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