Under average wholesale pricing, a pharmacy benefit manager gives its hospice client a discount off the average wholesale price of every medication purchased. The discount may range as high as 70–80%. It could be, and is often, much lower.

But even with the negotiated discount, the price paid by a hospice is substantially higher than what the pharmacy benefit manager actually pays the pharmacy filling the prescription—leaving a sizable markup (PBM spread) that the pharmacy benefit manager pockets as pure profit.

For example, a large hospice receives a 40% discount from its pharmacy benefit manager on the average wholesale price. For a typical hospice medication, e.g. Olanzapine 5mg tablet, the average wholesale price is approximately $370 for 30 tablets and, with its discount, the hospice pays its pharmacy benefit manager about $220. BUT the pharmacy benefit manager only pays the pharmacy filling the Olanzapine prescription $6.85—leaving a difference of more than $210 that the pharmacy benefit manager pockets as pure profit.