Pharmacy Benefits Uncut

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A few days ago, I listened to a recap of themes discussed in 2025 on the Relentless Health Value podcast. While these themes relate generally to the employer-sponsored healthcare system, they’re also specifically applicable to the pharmacy benefits space.

By the way, if you’re not yet a regular listener of this podcast, I highly recommend becoming one since Stacey Richter provides excellent weekly insights for anyone connected to the employer-sponsored healthcare industry, be it employers, clinicians, vendors, policy makers.

Below, I’ve adapted Stacey’s five themes to provide a blueprint for how you as an employer can optimize your pharmacy benefits plan in 2026.

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Make Fiduciary Aligned Decisions

As a health plan fiduciary, you have a duty to ensure your plan only pays reasonable prices for necessary expenses. In the pharmacy benefits space, this means providing access to drugs that improve health at reasonable prices, while limiting access to expensive therapies that provide little therapeutic benefit.

One of the keys to fulfilling fiduciary duty is trust. Trust between you and your plan members; trust between you and your vendors such as consultants, advisors, service providers; and trust between your plan members and their healthcare providers. But needless to say, there’s a shortage of trust in the pharmacy benefits world. You as employer, however, can and must demand trustworthy behaviour from all of your partners and refuse to work with those who’re not trustworthy.

Another key ingredient to fulfilling your fiduciary duty is simplicity. Every aspect of your pharmacy benefits plan should be understandable to you and should be focussed on providing access to the lowest cost drugs that lead to the greatest improvement in health. PBMs and other vendors in this space often introduce unnecessary complexity into contracts, drug pricing calculations, and claims data to drive up your costs and pad their bottom lines. Simplicity leads to trust so beware of any vendor selling you complex solutions that have the potential to obscure your goal of paying fair prices for effective drugs.

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View Everything Through the Lens of Incentives

You don’t need to be reminded that the healthcare system is riddled with perverse incentives and profiteering. Afterall, it’s underpinned by a structure in which one party’s costs are another’s profit. Look no further than the PBM model where their profits increase with increased volume of drug use as well as greater use of more expensive drugs, owing in large part to the rebate-driven drug pricing model.

And while misaligned incentives between PBMs and employers may be the most talked about ones, they abound in other areas of the pharmacy benefits world. Consider that many brokers or consultants receive payments from PBMs creating a pay-to-play scheme when it comes to PBM procurement. Do you really think your broker is acting in your best interest if they’re taking backdoor payments from a PBM?

Also consider out-of-pocket prescription drug costs, ostensibly designed to prevent wasteful drug use by plan members. In reality they often lead to cost-related non-adherence such as members skipping medication doses or delaying or avoiding filling prescriptions. These behaviours inevitably lead to deteriorations in member health that ultimately cost more in the long run.

These are just a few examples of the many misaligned incentives baked into employer-sponsored pharmacy benefits. A famous quote about incentives states “Show me the incentive and I will show you the outcome”. Understand the incentives driving every aspect your drug spend and you’ll be able to steer your pharmacy dollars towards reduced costs and improved plan member health.

Treat Clinical Pharmacy Services as an Investment

Suboptimal medication use (incorrect dosages, non-adherence, using the wrong drug, adverse effects) costs a staggering amount of money, consuming about 15% of total healthcare spend or about $500 billion annually.

This means that every employer should treat access to clinical pharmacy services as a non-negotiable investment in both the health of their plan members and in the financial sustainability of their healthcare plan. Failure to make this investment will lead to downstream costs such as increased emergency room visits, deterioration of chronic health conditions requiring additional care, and occurrence of preventable drug-related problems that are costly to treat.

Provide access to comprehensive medication management (CMM) to ensure your plan members’ medications are appropriate for them based on their conditions, their comorbidities, and other relevant factors. Not only will it optimize their therapy, it’ll save you money, lots of it in fact, with some studies showing CMM leading to an almost 20% reduction in total cost of care mainly driven by reduced hospitalizations and ER visits.

Also be sure your members have access to pharmacogenomics testing to help identify how their genetic makeup might affect their response to a particular medication. Just like with CMM, it’s been shown not only to improve health but also save healthcare dollars.

Importantly, make sure your CMM and pharmacogenomics testing vendors are unconflicted, meaning they don’t benefit one way or another from their recommendations. Let’s not create any additional perverse incentives.

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Demand Transparency and Access to Your Data

A lack of transparency and access to your pharmacy data creates both legal fiduciary risk for you and conditions ripe for overspending on prescription drugs since it obstructs your ability to make informed purchasing decisions.

Demand full transparency from your PBM and other vendors including defined contract terms on how drug prices and administrative fees are calculated, how formulary listing decisions are made, and how other services such as prior authorizations and clinical programs are delivered and paid for. Also ensure you ask all your vendors to declare all their revenue streams including commissions and volume-based fees. And don’t simply assume that because your PBM describes itself as “transparent” you’re home free. True transparency requires you to take the initiative, ask hard questions and demand guarantees.

Transparency also requires you to have full access to your data; not access to aggregate or summary data provided by your PBM, but rather individual prescription claims data. If you don’t have access to this data, it’s very likely that at least some of your pharmacy dollars are being lost in the system. As per the Consolidated Appropriations Act (CAA), you have the right to your data and the right to analyze independently of your PBM, and you’re required to do this as part of your fiduciary responsibility.

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Move from Volume to Value

Purchasing structures in the employer-sponsored healthcare space reward volume. In the pharmacy benefits world this takes the form of PBM rebates, which are designed to increase the use of high cost/high rebate prescription drugs in place of lower cost, equally effective drugs. It’s done with rebate-driven formularies rather than value-driven formularies, where rebates are the key factor in determining formulary placement of drugs instead of evidence of clinical effectiveness and cost-effectiveness.

This structure naturally prevents you from engaging in value-based purchasing, including obtaining the lowest net drug cost and negotiating prices for expensive new drugs to fairly reflect their health improvements.

Ask your PBM about how they integrate value into their decision-making criteria and make a concerted effort move away from a rebate-based drug purchasing whenever possible. Demand the lowest net cost for drugs and make sure you institute a biosimilars-first policy.

Volume-driven purchasing increases PBM profits at the expense of your plan and plan members. Make it your goal to transition towards value-based purchasing so that every dollar of your pharmacy spend leads to improved health for your members.

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The Bottom Line

Although it may seem like a daunting task, optimizing your pharmacy benefits plan is doable and indeed necessary for the financial sustainability of your overall healthcare plan. Start transforming your pharmacy benefits in 2026 using these five strategies.

See you in two weeks,

Nina

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Pharmacy Benefits Uncut is produced by Healthcare Decision Making, a consultancy that helps small and medium sized employers optimize their pharmacy benefits plan. We offer a comprehensive range of services focused on three areas: PBM procurement, ongoing management of your pharmacy benefits plan, and self-policing and oversight of your pharmacy spend. To learn more about how Healthcare Decision Making can help you, email Nina Lathia at nina.lathia@healthcaredecisionmaking.com

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