Replay - The Next Era of Pharmacy Benefits
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The era of opaque pharmacy benefits is ending. Rising pharmacy spend is consistently among the greatest cost concerns for large employers. Yet, despite the massive financial impact, many HR professionals operate with blind spots when evaluating how their pharmacy benefit management (PBM) generates revenue.
The industry is reaching an inflection point, with employers increasingly demanding more visibility into pricing and clinical decisions. Recent research reveals that transparent PBMs are projected to become the dominant model within three to five years. Why? Because employers can finally move away from rebate-heavy contracts and legacy systems to prioritize true net cost, clinical alignment, and full data transparency – all without sacrificing member care.
To understand this shift, Employee Benefit News (EBN) conducted a survey of 152 benefits professionals at organizations with 1,000 or more employees. We unpacked the results during our recent webinar, The Next Era of Pharmacy Benefits: New Research on Transparency, Satisfaction, and Experience, with Michael Green (Senior Director of Research, EBN), Kristin Begley, PharmD (Chief Commercial Officer, Judi Health), and Julia Bryan, SHRM-SCP (Benefits and Compensation Manager, Subaru of Indiana Automotive). They discussed the survey’s findings, debunked common myths surrounding disruption during and after PBM transitions, and explained the undeniable financial impact that "true transparency” can have.
Check out the highlights below! And if you want to review the full webinar replay, click here.
The Current State of the PBM Market
This will come as no surprise to those within the PBM industry: the “Big Three” continue to dominate the landscape, with 72% of survey respondents noting they use one of these major vendors. However, the status quo is shifting rapidly.
When asked about the future, respondents predicted a massive structural change. By a wide margin, benefits professionals believe that transparent PBMs will be the most common model among large employers in the next three to five years.
Employers are facing mounting pressure from new legislation, along with a rising fiduciary burden. This pressure forces plan sponsors to scrutinize their contracts and look beyond standard unit discounts. They want to know exactly where their dollars go.
Julia highlighted this exact realization during her RFP evaluation process for Subaru of Indiana.
"We historically relied on contract language and our consultant interpretations, but that only got us so far," she said. " What changed is our ability to look directly at our claims level data and validate our PMPM and how that's actually working. So the industry pharmacy trends were about 11% last year, and even with the GLP-1s in the mix, trend came in at 4%. So that's real-world validation, not just a projection, which is the most important.”
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Member Disruption Fears During Implementation
So, if the financial benefits of a transparent PBM are clear, why do some organizations hesitate to switch? The data points directly to one major concern: member disruption.
Pharmacy benefits can impact employees during highly vulnerable moments. HR teams understandably don’t want to navigate complicated open enrollments, confusing prior authorizations (PA), and angry phone calls. This fear of the unknown often keeps employers tethered to legacy PBMs.
However, the survey data reveals a significant gap between perception and reality. Among the employers who successfully transitioned to a transparent PBM, 9 out of 10 reported that the process was not disruptive at all. Furthermore, their pharmacy benefit programs stabilized within 90 days.
Julia shared her own experience of transitioning Subaru’s 6,000 associates to a new model. She anticipated a flood of complaints on January 1st, but the phones remained silent.
Kristin added that modern technology platforms make these transitions smoother than they were a decade ago. Legacy systems are rigid and inflexible, but modern electronic infrastructure handles data cleanly and efficiently. The fear of transition is often much larger than the reality.
Pharmacy Rebate Guarantees Are a Red Herring
For decades, the pharmacy benefit industry trained buyers to focus on rebate guarantees as a proxy for savings. Spreadsheets often highlight massive rebate checks, making traditional contracts look attractive on paper.
But as Kristin noted during the conversation, these rebates are usually driven by expensive formularies, the promotion of high-cost biosimilars, and unnecessary refills. In other words, high rebate strategies often come with underlying high costs.
Julia echoed this sentiment, explaining how Subaru had to look past the initial spreadsheet analysis to find real value.
“For us at Subaru, before making the switch, cost savings was always our primary focus, and we were especially looking at rebate guarantees when we were looking at our contract. And that's where most of the conversation centered, and we were always chasing those rebates. But I felt where there was smoke, there must be fire, which is why we felt comfortable with making that leap before the spreadsheets really supported the move."
Prioritizing True Net Cost Transparency
What can employers focus on when the smoke and mirrors of rebate guarantees finally disappear? The true net cost of the benefit.
The survey indicated that respondents prioritize net cost transparency over rebate levels by a wide margin. Employers want to see the actual economics of their plan. They want to know exactly what the PBM pays the retail pharmacies and what clinical criteria drive formulary decisions.
“Looking back, transparency should have been much higher on our list because it's what really allows us to trust the numbers, and ultimately manage the benefit more effectively,” Julia observed. “As Kristen talked about earlier, when you remove the spread pricing, the hidden fees, and rebate games, you get a much cleaner model that often produces lower net costs. And so, I think some employers underestimate how much they're losing in that black box of the traditional PBMs.”
Clinical alignment plays a massive role in this net cost calculation. As Kristin noted, “70% of your future costs are going to be because of the PBM's behavior and clinical behavior there with some of their ancillary fees.”
In other words, if a PBM profits from dispensing more expensive drugs, the clinical decisions will never fully align with the employer's financial goals.
A New Era of Health Benefits Administration with Judi Health
The findings from this research point to a definitive conclusion: the market is transitioning away from opacity and toward models that prioritize alignment, stability, and data visibility.
Employers do not need to settle for the status quo. Julia’s advice at the end of the discussion: “If you're frustrated with the rising pharmacy costs and the opaque contracts, there are definitely better options out there, and definitely get out there and explore them.”
Judi Health’s entire philosophy revolves around transparency and eliminating conflicts of interest. By leveraging a next-generation enterprise health platform, Judi®, our team is able to provide clients with full transparency and financial alignment, helping drive down costs without sacrificing member care.
When incentives are aligned and spread pricing is removed, the plan sponsor and the member alike receive a better experience.
Want to learn more about our approach to transparent health benefit administration? Contact our team today!
Frequently Asked Questions
How Can I Know if a PBM is Truly Transparent?
A PBM is truly transparent when it does not profit from drug spend in any way: not through spread pricing, rebate retention, formulary decisions, or affiliated pharmacies. True transparency means the PBM, including its parent company and subsidiaries, is paid only for administering the benefit and can provide equal pricing, equal rebate value, and audit access to prove it. Click here to read more about the difference between “small-t” transparency and True Transparency.
How Do I Get My Pharmacy Data?
Include this request in your RFP requirements. Request rebate data at the NDC-9 level, which identifies the drug but excludes package size. Since rebates are typically negotiated based on wholesale acquisition cost (WAC), package-level detail usually isn’t necessary. Access to this data helps employers have more informed, productive conversations with their PBM and ensures they can evaluate pricing based on their own data—not just the PBM’s reporting. If you want to learn more about accessing your pharmacy data, check out Bridget Mulvenna’s article.
Why Do Employers Care About Net Cost over Rebates?
Rebates often inflate the total cost of care. A PBM might favor a highly expensive drug just to secure a larger rebate. Net cost focuses on the final bottom-line expense after all fees and discounts, giving employers a much more accurate picture of their financial obligations.
How Long Does a PBM Transition Take to Stabilize?
According to the Employee Benefit News survey, nine out of ten employers who switched to a transparent PBM reported that their plan stabilized within 90 days. Many modern platforms can resolve transition issues within the first two weeks.
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