October 16, 2026

According to the Business Group on Health 2027 Employer Healthcare Strategy Survey, 25% of employers’ healthcare spend in 2025 was attributed to pharmacy.¹ That share is expected to continue to grow, as clinical innovation and demand for therapies that can be curative or significantly improve health outcomes, coupled with employers' constrained ability to influence pricing, have resulted in pharmacy trend for commercial payers consistently exceeding overall healthcare trend.

More broadly, the medical conditions associated with high prescription drug costs are also gaining more attention and investment within the medical benefit. Examples include autoimmune diseases and digestive health, where costly pharmaceutical treatments are contributing to rising interest in solutions like centers of excellence and virtual-first clinical care.

For patients, managing their prescription drugs often remains unaffordable and confusing. Navigating an opaque prescription drug market can create significant disruption, especially for patients managing multiple conditions or those presented with coupons and other discounts they may not fully understand.

Vendors, including pharmacy benefit managers (PBMs) and pharmaceutical manufacturers, are responding by developing programs to address long-standing foundational issues within the pharmacy supply chain.

Growing complexity, patient confusion, affordability concerns, and new strategic options are prompting employers to reassess their appetite for disruption, revisit existing strategies, and demand greater transparency and partner accountability.

Unit Cost: Why Drug Prices Matter

The challenge with pharmacy costs starts with drug prices. It is becoming increasingly clear that price transparency efforts alone will not lower the cost of pharmacy benefits. A variety of factors drive how manufacturers set prices, including the complexity and cost of research and development and clinical trials. Financial incentives and relatively shorter approval pathways may encourage manufacturers to develop medications that qualify for orphan-drug designation. Current incentives may also encourage innovation in categories that have come to be profitable, such as cancer and obesity.

As more highly priced drugs continue to come to market, employers will need to consider evidence beyond Food and Drug Administration (FDA) approval when making coverage decisions. Employers and their partners must assess whether a drug’s price matches its clinical efficacy and ensure that their formularies and utilization management (UM) strategies capture the best overall value.

Employers are also increasingly challenged with seeing higher prices in their health plan than those advertised to consumers. Direct-to-employer (DTE) and direct-to-consumer (DTC) models have become a consideration for employers looking to maintain employee access in the GLP-1 category. However, bypassing the PBM and directing patients to the cash market comes with patient affordability, clinical integration, and safety tradeoffs.

Pharmacy cost growth is also occurring in therapies administered in clinical settings covered by a plan’s medical benefit rather than its pharmacy benefit. The transparency of price and ability to negotiate rebates in that channel is limited, and concerns about patient disruption can be significant.

Armed with transparent price and rebate data, employers must:

• Explore new formulary, pricing and UM models with the help of consulting partners who can adapt their models to the changing market and value dynamics.
• Demand the transparency needed to identify and capture savings from lower-cost options (such as biosimilars) sooner and in more effective collaboration with the PBM.
• Reduce reliance on rebates. Rebates as a pricing feature can exacerbate contracting complications and create design limitations. With transparent pricing, employers can make more informed decisions about the rebates and the role such rebates should play in managing cost and predictability of drug spend.
• Demand greater transparency from their health plan partners and more active management of medication costs under the medical plan.
• Consider strategies that lower the cost of infused medications, including site of care management.
• Review and address the affordability challenges for patients consistently exposed to high drug prices due to chronic conditions.
• Stay informed about options that may provide more affordable access to medications, including those available through DTE channels. Whether or not these channels are deployed, they can more broadly inform pricing discussions.

Utilization: Managing Volume and Patient Safety Responsibly

As costly drugs receive new indications, cancer diagnoses rise, and polypharmacy rates increase, UM will remain central to pharmacy benefit strategy and an important lever for managing both costs and patient health outcomes.

Employers are in a difficult position and have to thoughtfully consider their coverage decisions for high-cost and high-demand drug categories. Beyond limiting coverage, outcome-focused UM strategies are needed to improve return on investment (ROI) for GLP-1 medications and high-cost specialty drugs. Additionally, centers of excellence for cell and gene therapies and cancer care could reduce burdens associated with prior authorization and other UM requirements.

The strategies are complex and may have to be tailored to individual drug classes. As such, experts within partners such as consulting firms, PBMs, and health plans can deliver higher value to employers in UM.

To expand focus beyond price control to improve overall value, employers must:

• Focus on regaining control in their ability to influence coverage and the utilization of medications, especially those that come at high cost.
• Watch the volume of prescriptions and understand the administrative cost and savings impact of UM programs.
• Seek partners who can offer innovative solutions that steer prescribers and patients to the lowest cost and most affordable options at the time of purchase to avoid prescription abandonment.
• Pair their provider quality strategy with medication UM strategy; include drug cost in the ROI guarantees of vendor partners tasked with managing specific disease states.

Vendor Accountability: Demanding Transparency and Better Alignment

New-generation PBMs and pricing models have the potential to improve visibility into drug pricing, contracting arrangements, and financial incentives, along with offering greater flexibility in managing formularies. These models are gaining traction. Thirty-two percent of employers expect to have a transparent or next-generation PBM model in place by 2027, and nearly half (47%) are considering implementation in 2028 or 2029.²

Overall, the current environment is a call to action for PBMs, manufacturers, health plans, health systems, and other vendors involved in managing prescription drug benefits, to act with greater transparency and offer a broader set of tools to payers. All PBMs should compete on total cost of care, prescription mix and volume, and clinical outcomes. Competitive differentiation should come from reducing waste, improving UM, and enhancing the patient experience.

To improve accountability of their partners, employers must:

• Actively engage in the PBM request for proposal process, include alternative options, and be transparent about their shortlist of “non-negotiables” to narrow down the finalist choices to partners aligned with the employer’s priorities and appetite for change.
• Hold all partners accountable for transparency and innovation in pursuit of the employer’s interests. Verify ROI claims made by all vendors.
• Weigh the value of the PBM contract guarantees against the desired level of control. Guarantees related to trends, rebates, PMPM costs, and discounts can improve financial predictability but limit an employer’s ability to make benefit changes during the contract period.
• Contractually protect audit rights.
• Increase the accountability of health plans and health systems for the cost of medications procured through the medical plan. Require transparency of how providers are reimbursed, transparency of rebates, and more active management of utilization and site of care. Encourage health plans to elevate drug cost considerations in their negotiations with health systems and to align provider incentives to better contribute to broader sustainability through more affordable drug choices.
• Select consulting partners with deep pharmacy benefits expertise. These partners should serve as accountable advisors, leverage available data, strengthen contractual arrangements, and ensure employers have full understanding of their pharmacy benefit’s contracts. Assess how those partners are adapting their evaluation methods to incorporate innovative approaches to drug purchasing, clinical outcomes, and patient support.
• Signal to manufacturers a willingness to be more restrictive in coverage decisions by leveraging clinical and cost effectiveness studies to inform coverage, especially for therapies whose prices are not commensurate with those benchmarks.

Conclusion

It is essential for all stakeholders to approach the growing challenges and concerns with a strong belief that change is possible and necessary. Financial incentives must be realigned to prioritize better health outcomes, lower costs, and improved patient experiences. To achieve these goals, the following conditions must be met:

• Greater demand should lower prices. Higher volume on lower margins can remain profitable while expanding access.
• Partners need to come to the table with a true and sustained desire for change.
• Employers need data and trusted relationships. Innovators and established entities alike need to become more effective partners in driving meaningful change

Related Resources

• Rethinking Prescription Drug Rebates: Moving Toward Transparent Pricing
• Biosimilars: Reviving the Conversation Amid Shifting Market Tides
• Prior Authorization: Benefits, Burdens, and Bold Ideas for Improvement
• Specialty Drugs and Gene Therapies: Driving Value and Mitigating Volatility
• Cell and Gene Therapy: Key Considerations for Employers

More Topics

Resource Affordability & Cost Management Pharmacy Vendor Management & Accountability