PBM reform: Employers are finding their own fix

Pharmacy costs remain one of the toughest challenges in employer-sponsored health plans, and comprehensive federal reform is likely a long way off. As Congress debates pharmacy benefit manager reform, employers continue to face rising drug prices and complex, often hidden, fees.

Instead of waiting on legislation, many organizations are finding their own fixes. By seeking transparency, improving communication and leveraging data, employers are taking proactive steps to control costs and design smarter benefit plans. Here are some practical ways human resource and benefits leaders can navigate today’s PBM landscape and better support their workforce.

The traditional PBM landscape

PBMs play a central role in the health care and benefits ecosystem. As intermediaries between drug manufacturers, pharmacies and insurers, they negotiate drug prices, design formularies and process pharmacy claims.

Over the years, PBMs have also become highly vertically integrated, often owning or closely aligning with insurers, specialty pharmacies and other parts of the supply chain. Although this consolidation gives PBMs greater leverage, it can also create conflicts of interest that aren’t always obvious to employers.

The challenges for employers are significant, and in many cases, employers may not even realize the extent of the problem. Rising pharmacy costs continue to strain budgets as prescription drug spending climbs year after year. Lack of transparency in contracts makes it difficult to know what is truly being paid and why.

Employers often receive limited or vague claims data, leaving them without the insights needed to fully understand utilization or identify cost drivers. Meanwhile, employers and employees continue to shoulder the rising costs of an overly complex pharmacy system.

Uncovering hidden PBM fees

For many employers, the true cost of pharmacy benefits is tough to pin down. That’s because PBM contracts often include hidden fees that drive expenses higher than expected. Common examples include:

• Spread pricing. Where PBMs charge employers more than they reimburse pharmacies.
• Rebate arrangements. Which may not be fully passed back to the employer.
• Administrative fees. Tucked into contract fine print.

Spotting these charges takes careful attention, but there are clear steps employers can take. Start by reviewing contract language and looking for terms that seem vague or overly complicated. Next, consider an independent audit of contracts and claims data, which can reveal hidden discrepancies. Many employers also rely on third-party consultants or benefits advisors, who bring the expertise needed to make sense of complex fee structures.

Even small hidden costs can add up fast. Just a few dollars of spread pricing on commonly prescribed medications may end up costing a midsized employer tens of thousands of dollars a year. Catching and addressing these fees early is the first step toward a more transparent and cost-effective benefits plan.

Transparent pharmacy benefit administrator alternatives

As frustration with traditional PBM models grows, many employers are turning to more transparent pharmacy benefit administrators. A handful of emerging models are gaining traction, including 100% pass-through arrangements, fee-only structures and other transparent approaches that eliminate hidden markups.

In these models, employers see the actual cost of prescriptions and pay only a clearly defined administrative fee. This creates a straightforward and predictable pricing structure that’s easier to explain, manage and budget for.

The benefits of transparency go beyond cost savings. Employers gain clear cost structures, better alignment of incentives between the administrator, employer and employees, and direct access and control to their plan and claims data. This visibility empowers HR leaders to make smarter decisions about plan design and employee support, while building trust in the benefit program overall.

Best practices for communicating benefit changes to employees

Clear communication is essential when it comes to pharmacy benefits. Employees need to know how changes will affect their access to medications and their out-of-pocket costs. Without that understanding, even well-designed updates can lead to confusion, frustration or a lack of trust.

Employers can ease transitions by focusing on three best practices:

• Use clear, jargon-free language. Skip the technical terms and explain changes in a way that highlights what matters most - how it impacts employee costs and care.
• Hold Q&A sessions or webinars. Giving employees the chance to ask questions builds confidence and shows they have support throughout the process.
• Share real-life cost examples. Side-by-side comparisons help employees clearly see the value of the new benefit design and where they might save money.

When communication is simple and thoughtful, employees are more satisfied, less confused and more engaged with their benefits overall.

Using data and claims insights to design better benefit plans

Data is one of the most powerful tools employers have to improve pharmacy benefits. By reviewing claims data, organizations can see how medications are being used and where costs are highest. Spotting patterns (like frequent use of certain drugs or rising specialty medication costs) gives employers the insight needed to make smarter decisions.

These insights can then be applied in several ways. Employers can optimize plan design by adjusting formularies or tier structures to encourage cost-effective options. Data can also guide targeted wellness programs that support employees managing chronic conditions, improving outcomes while lowering long-term costs. Plus, claims analysis helps leaders forecast and budget more accurately, giving them more control over future expenses.

Taking control of pharmacy benefits today

Employers don’t have to wait for Washington to act, as practical solutions are already available. And even when legislation eventually passes, it may not address all the challenges employers face in managing pharmacy benefits.

The key takeaway is clear: by focusing on transparency, communication and smarter use of data, organizations can take meaningful steps to better control pharmacy costs and provide greater value to their employees.

For HR leaders, the path forward is to be proactive. Exploring alternative pharmacy benefit administrator models, improving how benefit changes are communicated, and leveraging claims insights to design stronger plans can all help reduce costs while building trust. The earlier these steps are taken, the better prepared employers will be to support their workforce, no matter how the legislative landscape evolves.

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Brian Mauck is director of revenue and product development at Woligo. Contact him at [email protected].