What Employers Need to Know About Pharmacy Costs Right Now
Pharmacy has become one of the hardest parts of an employee benefits program to manage. Drug prices are shifting quickly, biosimilars are changing specialty economics, and GLP-1s are generating new questions from employees every week.
In our recent webinar, Tom Zimmerman, Sr. Benefit Consultant, at Seubert & Associates, sat down with Monica Gindhart of Navion to cut through the noise. The central theme: employers need to look past the headline numbers and understand what their pharmacy program actually costs.
Missed it? Watch the full webinar recording.
A bigger rebate no longer means a better deal
For years, employers were taught that a large rebate signals a strong contract. That model is changing. After the 2024 removal of the Medicaid rebate cap, manufacturers began lowering list prices on a number of drugs, starting with insulin and now extending into GLP-1s.
Because rebates are calculated as a percentage of a drug’s cost, lower prices mean smaller rebates. Monica noted this isn’t necessarily bad news. The goal is the lowest net cost, and lower upfront prices also help members, especially those on high deductible plans who pay from the first dollar.
Biosimilars are reshaping specialty costs
Biosimilars are designed to bring down the cost of high-priced specialty biologics, but early adoption was slow. When Humira’s first biosimilars launched, many were priced close to the original with large rebates, giving prescribers and PBMs little reason to switch. Newer launches, like Stelara’s biosimilars, came to market with low list prices and minimal rebates from day one.
The catch: a biosimilar-preferred formulary can lower rebates across your entire specialty channel. If your plan has little use of these drugs, it may not be the right financial fit. Evaluate formularies against your own claims experience.
GLP-1s: from “should we cover them?” to “how?”
With costs topping $1,000 per member per month and concerns about weight regain after members stop treatment, employers are rethinking how they offer GLP-1 coverage. Options discussed included:
- Direct-to-consumer or direct-to-employer pricing, which can cut medication costs roughly in half
- Carve-out programs outside the PBM, which let employers set their own eligibility criteria and member cost share
- Lifestyle requirements such as health coaching, dietitian visits and regular activity tracking tied to continued coverage
When comparing a carve-in to a carve-out, remember to factor in lost rebates to find the true lowest net cost.
Specialty drugs need active management
Specialty medications make up just 1 to 2% of prescriptions but often drive more than half of pharmacy spend, sometimes from only a handful of members. Beyond standard tools like prior authorization and step therapy, employers are exploring therapeutic interchange, patient assistance programs, site of care management and specialty carve-outs.
Before trusting a vendor’s savings projection, Monica recommended checking:
- Rebates you would lose under your current PBM contract
- The fee structure, per employee per month versus a percentage of savings
- Integration, carve-out and claim file fees charged by your PBM
- How many members will actually qualify for manufacturer assistance, which often has income limits
Transparency is only useful if you act on it
New transparency rules will show employers how much their PBM earns, but they won’t require PBMs to lower costs. A PBM making more money isn’t automatically a reason to switch if your plan’s unit cost is still the lowest available.
As a plan fiduciary, the job is to put that information to work. Benchmark the market regularly, confirm your net costs drop as rebates decline, and make sure employees know about the cost-saving tools and programs your plan already offers.
Three takeaways for employers
- Don’t judge your pharmacy program on rebates alone. Focus on what the plan actually pays once all the economics are accounted for.
- There’s no one-size-fits-all strategy. The right approach depends on your population, drug mix, contract and financial goals.
- Transparency only helps if you know what to do with it. More data is valuable when it leads to better decisions.
The full session includes real client examples and deeper detail on every topic above. Watch the pharmacy benefits webinar recording.
Have questions about your own pharmacy benefits? Through our partnership with Navion, Seubert’s Employee Benefits team helps employers evaluate PBM contracts, benchmark plan performance and find where the economics aren’t working in their favor.
Tom Zimmerman | Sr. Benefits Consultant
[email protected] | 717-395-6118 | connect on LinkedIn
If you’d like to take a closer look at the strategies Seubert could implement to help your business Minimize Risk. Maximize Potential. Get in touch today!
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