What Can Employers Do About Rising Pharmacy Costs?

What Can Employers Do About Rising Pharmacy Costs? If you’ve ever wondered why prescription drug costs seem to keep rising, even when your organization is doing everything it can to manage them, you’re not alone. Pharmacy benefits are a complex system, with many decisions happening behind the scenes that influence what your organization pays for prescription drugs and what employees end up paying at the pharmacy counter.

That’s why Conner Insurance is excited to contribute to Side Effects May Include: The Hidden Costs of Prescription Drugs. The documentary and book pull back the curtain on how that system works, showing how money moves through the supply chain and how decisions made along the way can affect your organization and your people.

But understanding what’s happening behind the scenes is just the first step. The more important question for employers and HR leaders is: What can you do about it?

The answer starts with taking a closer look at your own pharmacy benefits, understanding where your money goes, who you’re working with and whether the incentives driving those relationships are aligned with the needs of your organization and employees.

Transparency is the starting point.

Before you can make changes to your pharmacy benefits, you need a clear picture of how it works. That means understanding where your pharmacy dollars go, how your pharmacy benefit manager (PBM) makes decisions and what happens to rebates from drug manufacturers.

For many employers, gaining visibility into their plan can be a challenge. According to KFF’s 2024 Employer Health Benefits Survey, 37% of employers with 500 or more workers said they did not know how much of the prescription drug rebates negotiated by their PBM or health plan they received as savings. Only 19% said they received most of those rebates. Numbers like these show how difficult it can be for employers to know how much of the savings negotiated on their behalf is making its way back to the plan.

That’s where the people you work with become important.

As an employer, you rely on PBMs, benefits consultants, and other partners to help you manage your health plan. Their advice can have a big impact on the way your pharmacy benefits are structured. That’s why it’s important to know how these partners are paid and whether their financial interests align with the needs of your organization and employees.

And if they don’t, ask for a second opinion.

You aren’t powerless in this system. You can demand better information. Ask harder questions. And choose partners whose interests are aligned with your organization. Then use that foundation to explore new ways of purchasing and accessing medications.

The important thing is knowing you have options and taking an active role in deciding which ones make sense for your organization and your people.

Start with solid questions.

You don’t have to figure everything out at once. A good place to start is by looking at your current pharmacy benefits and asking important questions:

• Do we have complete access to our pharmacy data, including plan-paid and employee-paid amounts? Do we have access to the pharmacy contract that dictates these costs?
• Does our PBM arrangement give us the information and control we think it does?
• Are there other ways for employees to safely access high-cost medications?
• Are our interests and our partners’ financial incentives aligned?
• If we find an opportunity to improve our pharmacy benefits, do we have the flexibility to act on it?

The answers can help you see if your current arrangement is working well or if there is room to improve. Once you understand your current arrangement, you can start looking at what other options may be available.

Turning data into better decisions.

Transparency allows you to see the system. Alignment gives you the opportunity to change how you participate in it. And that’s where the next part of this conversation begins.

In our next article, we’ll move from the why to the how and explore some of the practical strategies employers can use to improve pharmacy contracts, access high-cost and specialty medications differently, and create pharmacy benefits that work better for both the organization and the people it serves.

If you have questions about your pharmacy benefits, don’t hesitate to reach out. 

Cost figures, coverage details, and plan design elements presented in this blog are for illustrative purposes only and do not reflect any specific insurance policy or provider. Actual costs will vary based on your organization’s health plan, the insurance carrier, provider contracts, and the specifics of each medical situation. Employers and employees should refer to their official plan documents or speak with their broker or benefits consultant for guidance if needed.