Our News

Why employers should be taking a closer look at pharmacy benefits, PBM transparency, and traditional self-funding.

Prescription drug costs continue to place significant financial pressure on employer-sponsored health plans. Specialty medications, rising drug prices, and complex pharmacy benefit arrangements are making it increasingly difficult for employers to manage spending while continuing to provide meaningful coverage to employees.

But here’s a question employers should be asking:

Are your pharmacy benefits actually designed to control your costs, or are they designed around the financial interests of your insurance carrier and pharmacy benefit manager (PBM)?

The Problem With Carrier-Controlled Formularies

A pharmacy formulary is the list of medications covered under a health plan. While formularies are often presented as cost-management tools, they don’t necessarily deliver the best financial outcomes for employers.

In traditional carrier-controlled arrangements, employers may have limited influence over which drugs are covered, how medications are priced, and whether more cost-effective alternatives are available.

Formulary decisions may also be influenced by manufacturer rebates and other financial arrangements that don’t always align with the employer’s best interests.

Just because a medication is preferred by your carrier doesn’t mean it’s the most cost-effective option for your health plan.

Rebates Don’t Always Equal Savings

Carriers and PBMs frequently promote prescription drug rebates as a way to reduce employer costs. But a large rebate doesn’t necessarily mean an employer is paying the lowest net price for a medication.

In some arrangements, higher-priced medications may generate larger rebates, creating financial incentives that complicate the true cost of pharmacy benefits.

Employers should be looking beyond rebate guarantees and asking more important questions: What is the actual net cost of the medication? Who receives the rebates? What fees or other compensation are retained by the PBM?

Transparent PBM arrangements can provide greater visibility into drug pricing, administrative fees, and manufacturer payments, allowing employers to make more informed financial decisions.

Specialty Drugs Require a Different Strategy

High-cost specialty medications represent one of the greatest challenges facing employer health plans.

Rather than relying exclusively on carrier-managed specialty pharmacy programs, employers should explore independent specialty drug management solutions.

Third-party programs, including organizations such as Payer Matrix, may offer alternative sourcing arrangements, international sourcing opportunities where legally permitted, manufacturer assistance programs, and other cost-containment strategies.

These solutions can create meaningful savings opportunities while helping employees maintain access to necessary treatments. However, eligibility, program requirements, patient protections, and potential coverage limitations must be carefully evaluated.

Why Traditional Self-Funding Changes the Conversation

For employers looking to gain greater control over pharmacy spending, traditional self-funded health plans can offer significant advantages.

Unlike fully insured arrangements, where the carrier generally controls many aspects of the pharmacy benefit, traditional self-funding can give employers greater flexibility to customize their pharmacy strategy.

With the right partners, employers may have the ability to:

• Engage independent, transparent PBMs rather than relying solely on carrier-owned solutions.
• Implement third-party specialty drug management programs.
• Evaluate drug exclusions and alternative therapies based on clinical appropriateness and financial impact.
• Gain greater visibility into actual pharmacy claims, pricing, and utilization.
• Collaborate directly with their third-party administrator (TPA), specialty pharmacy partners, and benefits consultant to manage high-cost claims.

Traditional self-funding isn’t the right solution for every employer, and it requires thoughtful plan design, appropriate risk protection, and ongoing oversight. But for employers with the right structure, it can provide something increasingly valuable: the ability to make more informed decisions about where their healthcare dollars are going.

Difficult Decisions Still Need to Be Made

Employers are increasingly being forced to make difficult decisions about which medications their health plans can reasonably afford to cover.

Excluding a high-cost drug may reduce spending, but it can also create serious challenges for employees who depend on that medication.

These decisions should never be made based on price alone. They require careful clinical evaluation, consideration of appropriate alternatives, compliance with applicable coverage requirements, and a strategy to help employees navigate treatment options.

The goal isn’t simply to deny expensive medications. It’s to find smarter, more sustainable ways to provide access to necessary care.

Employers Have a Fiduciary Responsibility

For ERISA-covered health plans, responsible plan fiduciaries have a duty to act prudently and in the interests of plan participants and beneficiaries, including ensuring that plan expenses are reasonable.

Outsourcing pharmacy benefits to an insurance carrier or PBM doesn’t automatically eliminate those responsibilities.

Employers should understand how their pharmacy benefits are managed, what their service providers are being paid, and whether available alternatives could better serve their plan and employees.

The Bottom Line: It’s Time to Ask Better Questions

Rising prescription drug costs aren’t going away, and simply accepting the carrier’s formulary, rebate structure, or specialty pharmacy program may mean overlooking opportunities for meaningful savings.

Employers need greater transparency, better data, and more control over their pharmacy benefits.

Traditional self-funding, combined with independent pharmacy solutions and proactive plan management, can offer a more strategic path forward.

At J Gard Benefit Consultants, we believe employers deserve to understand exactly how their healthcare dollars are being spent. Our role is to help clients challenge the status quo, evaluate alternative funding and pharmacy strategies, and find solutions that balance financial sustainability with employee access to quality care.

Because controlling healthcare costs shouldn’t mean giving up control of your health plan.