Signs it is time to change your PBM vendor, and how to overcome common hesitations

Employer health care spending is expected to increase by 8% in 2025, the highest rate in a decade, and nearly a third of each dollar spent will go toward pharmacy costs. These, too, will continue to rise. According to a recent report from the Federal Trade Commission (FTC) on traditional pharmacy benefits managers’ (PBMs) role in generic drug price increases, pharmacy costs for both plan sponsors and patients grew by 21% for commercial claims and about 15% for Medicare Part D claims between 2017 and 2021.

This inflationary cost trend has unfortunately become the status quo for plan sponsors, who are reaching a breaking point. Despite traditional PBMs’ lack of transparency, which leaves employers in the dark about their drug spend while generating billions in revenue for the PBMs, most plan sponsors continually renew their contracts. Meanwhile, alternative solutions exist today that align better with plan sponsors’ interests and will partner with them to ensure the best pharmacy offerings at the best price for their members. With such options available and many plan sponsors unhappy with the service they receive from PBMs, why haven’t more plan sponsors moved away from the traditional PBM model? Why is there a hesitancy to deviate from the familiar approach?

Fear of the unknown is one of the biggest obstacles to progress, but plan sponsors shouldn’t let it block them from seizing opportunities that could help save their plans and members money and improve their members’ pharmacy experiences. Combating these hesitations will require careful consideration of both the friction points they experience with their current PBM and how alternative solutions could serve them better, benefiting both their members and their bottom line.

Plan sponsors’ common pain points with traditional PBMs

From my time working across pharmacy settings – as a pharmacist, at a health plan, as a benefits consultant, and now on the technology side, I have seen plan sponsors struggle repeatedly with a few common PBM challenges.

The first is poor execution. Traditional PBM plans often make errors with plan design or when reconciling plan spend at the end of the year. These errors are almost always detrimental to the plan sponsor or the member, and traditional PBMs can take weeks – sometimes months – to reconcile them. Everyone makes mistakes, but execution missteps without the proper follow-up can lead to worse outcomes and negative member experiences.

Next is a lack of communication. Managing a pharmacy plan requires thousands of small daily decisions, including those relating to formulary changes, utilization management, and new clinical programs. Traditional PBMs tend to make these decisions unilaterally for their benefit, without transparent communication or collaboration with the sponsor. As a result, plan sponsors may not see the full scope of options available to them, especially those that would not benefit the PBM. These decisions can amount to millions of dollars spent or saved annually, so it is crucial that plan sponsors, who have a fiduciary duty to their members, understand all the available options so they can make informed decisions.

The third is an unwillingness to adapt to plan sponsors’ needs. For example, flexibility in the plan design can frequently help bring down costs for expensive or specialty drugs. Because traditional PBMs often own the specialty pharmacy, they typically do not allow for customizations that reduce the volume of high-cost drugs dispensed. Rather than prioritizing cost-saving edits that could reduce spend, traditional PBMs generally find ways to justify it.

The friction points above are typical of plan sponsors’ day-to-day interactions with traditional PBMs. New models, however, account for each of these to deliver a better experience for both employers and their benefit plan members.

Related: The state of PBM regulation in the states

What to look for in a new pharmacy benefits solution

Changing PBM solutions may seem daunting but knowing what to look for can help guide the search. A great PBM partner has three key qualities.

Number one: alignment. A PBM should completely align with the values, needs, and financial priorities of the plan sponsor. This means they do not have any alternative financial incentives, such as owning dispensing assets or gaining revenue from clients’ drug spend. At a minimum, pricing should be transparent, using index models like the National Average Drug Acquisition Cost (NADAC), and all manufacturer revenue earned, not just direct rebates, should be fully passed back to the sponsor. This helps ensure that plan resources are not wasted, and members receive the best value.

Plan sponsors should also look for PBMs willing to be true, consistent partners. The PBM-client relationship should be collaborative, flexible, and rooted in trust (i.e., a culture of yes). It is more than just a business transaction. They should prioritize member and client satisfaction and be equipped to rapidly remedy any errors, and if there is an error, the PBM should not profit from it. Plan sponsors should look for pharmacy solutions that consistently engage and share data with their clients to enhance member experiences and address increases in spend.

Finally, as the industry continues to evolve rapidly, you should look for a PBM partner that can adapt to market and regulatory shifts. For example, having a partner with a robust technology platform to adjudicate claims and support great customer service can empower plan sponsors to shift their plans over time in a way that best supports their members. This will help to future-proof the pharmacy benefit and maintain agility for years to come.

Embracing change

A shift away from the status quo can be scary, but with pharmacy costs and health care spending nearing unsustainable levels and all-time highs and great scrutiny of the fiduciary obligations of plan sponsors, the stakes are too high to hope for better communication, collaboration, and results from traditional PBMs.

As you consider your PBM solution, remember that you have many options and opportunities in the market to better serve your member population. Even small steps toward finding a more aligned, transparent partner, such as acknowledging the PBM challenges you face today or putting out a request for proposal can be important progress and a step in the right direction, respectively.

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Hope Nakazato, PharmD, MBA, VP of Business Development, Capital Rx

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Source: https://www.benefitspro.com/2025/02/10/signs-it-is-time-to-change-your-pbm-vendor-and-how-to-overcome-common-hesitations/

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