If there is one topic that comes up in nearly every renewal conversation we have right now, it’s pharmacy spend.
Employers are seeing it in their claims data and feeling it in their renewal numbers. For many organizations, prescription drugs have quietly become one of the biggest drivers of their increase, and the trend shows no sign of slowing down.
The good news is that pharmacy is also one of the most manageable parts of a health plan. In our experience, it’s often the low-hanging fruit at renewal, and there are practical solutions that many employers have not yet explored.
Why Pharmacy Costs Are Climbing
Not long ago, pharmacy made up roughly 15% of total plan spend. Today, it can reach 35 to 40%. Several forces are behind that shift:
- Specialty medications. Drugs for complex and chronic conditions can cost thousands of dollars per month. Sometimes a small number of prescriptions can account for a large share of total pharmacy spend.
- GLP-1 medications. Demand for these drugs has grown rapidly, and many employers are now deciding whether to cover them for weight loss at all. Some large employers have pulled back that coverage, while others are looking for ways to keep it affordable. There is no one right answer, but it’s a decision that deserves a clear look at both the cost and the impact on employees.
- Injectables and gene therapies. Many of these are genuine advances in care, but they come at a significant price. A single gene therapy treatment can cost millions of dollars. For a smaller employer, one claim like that can reshape a renewal.
Everyday choices add up, too. Many employees default to the most familiar option at the pharmacy counter without knowing a lower-cost alternative exists. Repeated across an entire workforce, those small decisions have a real impact on plan costs. Pharmacy is one of several forces behind rising premiums, which we break down in Why Is Our Renewal So High?
Why Pharmacy Is the Low-Hanging Fruit
Because prescription drugs represent such a large share of spending, even modest changes can produce meaningful savings. And unlike some cost drivers, many pharmacy changes can be put in place without changing carriers or disrupting employees’ access to care.
When we review a client’s pharmacy spend, we start by understanding where the money is going:
- Which medications are driving the most cost?
- How much of total spend comes from a small number of specialty drugs?
- How is the pharmacy benefit structured and managed?
- What does the plan design encourage employees to choose at the pharmacy counter?
The answers usually point to a handful of practical changes.
Practical Ways to Bring Pharmacy Costs Down
Most employers have more options than they realize. Here are a few of the places we look first:
- Lower-cost equivalents. Generics and biosimilars work the same way as many brand-name drugs, but many plans aren’t designed to steer employees toward them.
- Smarter alternatives. In a Johns Hopkins study, employers that replaced costly drugs with lower-cost options of equal clinical value cut prescription spending by 9 to 15%.
- How prescriptions are filled. For medications employees take every month, switching from the retail pharmacy counter to mail order can lower what they pay and make refills easier.
- Savings that go unclaimed. Many drug manufacturers offer coupons and assistance programs for expensive brand-name and specialty medications, but employees may not know they exist.
- Looking beyond the border. U.S. prices for brand-name drugs average more than four times those in other high-income countries. We’ve even seen medications that cost $5,000 per prescription here available for around $500 abroad, and adding a reputable international sourcing program can help your plan take advantage of that difference.
- Guardrails worth keeping. Prior authorizations can feel like a hassle, but removing them can trade a small frustration today for a much bigger one at renewal.
None of these are a one-size-fits-all fix. Which ones make sense, and how much they can save, depends on what’s driving your plan’s spend. That’s where the real work begins.
Bring Employees Into the Solution
Pharmacy savings only happen when employees understand their options. Most people already compare name brands and store brands at the grocery store. The same thinking applies at the pharmacy, but employees rarely know where to start.
That’s where clear communication and easy access to help make a difference. Through our Customer Concierge Text Line, employees can text our team to ask whether a lower-cost alternative exists, whether a manufacturer coupon is available, or how to move a prescription to mail order. Employees save money, the plan saves money, and HR doesn’t have to field every question themselves.
Pharmacy Spend Does Not Have to Drive Your Renewal
Pharmacy is one of the most manageable parts of a health plan, which raises a fair question. When your renewal arrived, did your broker explain what was driving your pharmacy costs? Did they bring options to address it, or simply deliver the number?
If pharmacy spend has never been part of the conversation, it should be. A good broker doesn’t wait for you to ask. They review your claims throughout the year and bring options to the table well before renewal.
That’s where Silberman Group focuses its work. We help businesses in Chattanooga, TN and the surrounding region understand what’s driving their pharmacy spend and come to the table with practical solutions. Using your current prescription reporting, we can show you how much you could save through our pharmacy cost containment programs, based on the exact medications your employees are taking today. If your current broker hasn’t done that for you, it may be worth a conversation.
