PBM Opacity Is Turning Prescription Benefits into a Business Risk

Employer healthcare costs are becoming harder to predict, harder to explain and harder to absorb. A report from consulting firm Mercer found the average cost of employer-sponsored health coverage reached $17,496 per employee in 2025, while prescription drug spending rose 9.4% among large employers. At the same time, additional Mercer research indicated 61% of employers with 500 or more employees are actively evaluating new approaches to managing pharmacy benefits.

Those numbers reflect more than rising healthcare inflation. They suggest employers are beginning to question whether the assumptions behind traditional pharmacy benefit management still make sense.

For years, the conversation centered on negotiating larger rebates, deeper discounts and better average wholesale price (AWP) guarantees. Those measures became the standard way employers evaluated pharmacy benefits. But if costs continue climbing while employees struggle to access medications, perhaps the wrong things have been measured all along.

Bigger Discounts Don’t Necessarily Create Better Outcomes

Traditional pharmacy benefit manager (PBM) contracts often reward purchasing mechanics rather than employer value. Higher rebates can exist alongside higher drug spending. Larger discounts off inflated list prices don’t necessarily translate into lower net costs. Measuring success by rebate checks or AWP discounts can create the appearance of savings without addressing whether employers or employees are actually better off.

The more important question isn’t how large the discount appears. Instead, it’s whether the pharmacy benefit delivers the lowest net cost while helping employees receive the medications they need without unnecessary delays or administrative barriers. That distinction matters because pharmacy benefits increasingly influence workforce affordability, retention, financial planning and employee trust.

HR Should Challenge the Assumptions, Not Just the Vendor

Many HR teams are searching for a better PBM. The larger opportunity may be to rethink what they should expect from the pharmacy benefit itself. The 2026 Milliman Medical Index projected annual healthcare costs of $37,824 for a family of four covered by a typical employer-sponsored plan and $8,460 for an average individual. Pharmacy spending, net of rebates, now represents approximately 23% of total healthcare costs, driven largely by specialty medications and glucagon-like peptide-1(GLP-1) therapies.

Those numbers make one thing clear. Employers can’t negotiate a large enough rebate to avoid the financial pressure they are heading toward if the underlying incentives remain unchanged.

Instead of asking how much of a discount they received, employers should ask other questions:

• Are employees receiving medications quickly?
• Are unnecessary barriers being removed?
• Is the pharmacy strategy producing the lowest total cost, or simply the largest reported savings?

Those are fundamentally different measures of success.

An Alternative Way to Evaluate Pharmacy Benefits

Recent employer research suggests that mindset is already beginning to change. The Pulse of the Purchaser 2025 report, conducted by the National Alliance of Healthcare Purchaser Coalitions, encouraged employers to secure full claims data access, adopt more transparent PBM arrangements and expand direct contracting strategies. Reliance on the three largest PBMs fell from 72% in 2024 to 61% in 2025, while use of transparent PBMs more than doubled from 12% to 31%. That shift reflects a growing recognition that employers need greater control over how pharmacy dollars are spent.

Several approaches deserve closer attention:

• Measure lowest net cost, not biggest discounts. Pharmacy benefit performance should be evaluated by total employer spending and employee access, not rebate size or AWP guarantees.
• Adopt pass-through pricing. Transparent, pass-through arrangements allow employers to understand actual acquisition costs, vendor compensation and where healthcare dollars are going.
• Eliminate unnecessary barriers to access. Employees shouldn’t have to navigate avoidable administrative complexity simply to receive physician-prescribed medications.
• Explore direct-to-employer and direct-to-patient models. Responsible purchasing arrangements that reduce unnecessary intermediaries can simplify the system while improving affordability and predictability.

Benefits Leadership Requires New Thinking

Healthcare costs will likely continue rising, and specialty medications will remain one of the fastest-growing pressures on employer health plans. The organizations that respond most effectively will likely be the ones that go beyond negotiating within the existing system and move toward questioning whether the system itself rewards the right outcomes.

For HR leaders, that means moving beyond discounts and rebates as the primary measures of success. The goal should be to build pharmacy benefit strategies that deliver the lowest net cost, improve employee access, and create predictable, sustainable value for both the workforce and the organization.

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Employee Benefits
• Finance and Budgeting
• Total Rewards