What Employers Can Do as Drug Pricing Reform Accelerates
- Buzz Health Research Team
- 7 days ago
- 5 min read
Updated: 2 days ago
Key Takeaways
Prescription drug spending is accelerating, driven by GLP-1 therapies and high-cost specialty medications, placing sustained financial pressure on employer-sponsored health plans and making pharmacy strategy a critical component of long-term cost control.
Low employee copays do not equal low plan costs. True financial impact is determined by net drug costs after rebates and fees, underscoring the need for stronger PBM oversight and pricing transparency.
Employers can act now by improving contract governance, increasing cost transparency, and supporting medication adherence to shift pharmacy benefits from a reactive expense to a strategic advantage.
In early February of 2026, Congress passed the Consolidated Appropriations Act. This bill focuses on pharmacy benefit manager (PBM) reforms to promote drug pricing transparency, strengthen reporting requirements, and overhaul PBM business practices.
The timeliness of this bill reflects growing concern over rising prescription drug prices. In 2024, prescription spending reached $487 billion–$50 billion higher than in 2023–largely driven by the increased use of GLP-1 agonists for type 2 diabetes and obesity, as well as specialty medications for oncology and rare diseases.
The steady climb in drug pricing and prescription spending continues to put pressure on employers. While it will take time to implement the provisions and assess the full impact, health plan sponsors can take proactive steps to manage health care spending and ensure medication affordability for their employees.
Why Drug Costs Are a Growing Concern
As mentioned, prescription drug spending is rapidly accelerating. In 2024, total U.S. prescription expenditures rose 11.4% from the prior year. This growth is driven disproportionately by specialty drugs, which accounted for more than $129 billion and are expected to continue to outpace traditional drug spending.
Specialty medication costs, particularly in oncology, have climbed steadily over the years. Between 2017 and 2021, the list price of certain cancer treatments rose by 26%, reaching an average of $238,000. By 2024, the median annual cost of certain newly launched cancer drugs exceeded $400,000.
These price points far exceed what Americans can afford. With a median household income of around $83,730, the vast majority of patients cannot afford these high costs without health insurance, leaving employer-sponsored health plans to shoulder the financial burden of these treatments.
These higher costs are now translating into higher premiums. Employee health insurance premiums are expected to rise by an average of 6.5% in 2026 due to both price inflation and greater utilization of high-cost medications.
As the issue of rising costs persists, the cycle becomes clear: medication costs drive premium increases, and employers must balance the financial impact they absorb and the amount they pass on to employees.
How Drug Pricing Impacts Employers
While rising drug spend flows through employer-sponsored health plans, the financial impact is often misunderstood.
A common misconception about prescription costs is that a health plan is “affordable” simply because employee copays are low. In reality, copays represent only a fraction of total pharmacy spending.
To understand what the costs are actually going toward, it’s important to recognize the three layers of prescription pricing, which include:
List price (WAC): The price set and published by the manufacturer.
Negotiated price: The contracted rate between PBMs, pharmacies, and manufacturers.
Net cost: The final cost to the health plan after all rebates, discounts, and fees are applied.
The gap between what an employee pays at the pharmacy and what a health plan pays can be substantial. This explains how a medication with a $10 copay can still cost a health plan hundreds or even thousands of dollars per fill.
Over time, these high-net-cost drugs drive total pharmacy spending. For plan sponsors, visibility into and control over net cost ultimately determines overall plan spending.
Practical Steps Employers Can Take
While employers cannot directly set drug prices, they can influence the structures and contracts that shape their total pharmacy spend.
Below are three of the most effective strategies to follow to maximize visibility and control over your health plan costs.
1. Encourage Cost Awareness for Employees
Education is one of the most effective cost-control strategies. When employees have visibility and understanding into pricing and available alternatives, they are more likely to make cost-conscious decisions.
Employers can:
Promote the appropriate use of direct-to-consumer (DTC) pharmacies, cash-pay options, and prescription discounts.
Encourage employees to compare prescription costs across pharmacies.
Guide members toward preferred in-network pharmacies with better contracted rates.
Even incremental savings per prescription can substantially reduce overall spend.
2. Strengthen PBM Contract Oversight
PBMs play a central role in drug pricing and treatment access, and contracts determine the visibility and leverage an employer retains.
Therefore, employers should ensure PBM contracts include:
Audit rights, including the ability to use independent third-party auditors.
Timely access to detailed claim data.
Clear and regular reporting on rebates, fees, and net costs.
Robust PBM oversight allows employers to verify that contractual terms are being met and to identify ways to improve pricing and optimize formularies.
3. Close Coverage Gaps and Support Adherence
When employees skip doses or ration their prescribed medication due to high costs, health outcomes worsen, ultimately resulting in higher healthcare expenses.
Evidence shows that lowering out-of-pocket costs can improve medication adherence, which in turn reduces hospitalizations and other healthcare expenses. Additionally, improving an individual’s physical health while minimizing financial stress from high healthcare costs can positively affect mental health.
Employers can mitigate these risks by:
Reviewing high-cost claims and, when appropriate, identifying lower-cost alternatives.
Promoting the use of generics and biosimilars, which often offer significant savings compared to brand names and biologics.
Supporting medication adherence, such as refill reminders, 90-day supply fills, and medication counseling.
Final Thoughts: Taking Control of Pharmacy Costs
Prescription drug spending will continue to climb, hindering access and adherence, leading to poor health outcomes. While federal policy changes are expanding, their effects will take time to reshape the healthcare landscape.
Instead of waiting, employers already have powerful tools at their disposal to help their employees save on prescription drugs.
Those that prioritize promoting cost-saving options, strengthening PBM contracts, and proactively identifying and addressing adherence challenges take strategic control of employer-sponsored health plans.
Pharmacy spending is a growing cost that isn’t slowing anytime soon. The organizations that take strategic action now will shape the future of their health plans while protecting their budgets and employees’ well-being.
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