6-minute read
Pharmaceutical costs are skyrocketing, and for years, Pharmacy Benefit Managers have been quietly raking in cash like a casino house that never loses. They were supposed to negotiate drug prices to save money for employers and employees, but instead, many have turned into middlemen with a knack for pocketing rebates, marking up costs, and keeping pricing as clear as a foggy bathroom mirror.
But the jig might be up. Recent statements from policymakers, including Robert F. Kennedy Jr. during his Senate Finance Committee nomination hearing, suggest that PBM reform is finally getting the spotlight. Turns out, when nearly everyone — from patients to policymakers — agrees that a system is broken, change becomes inevitable.
So what does that mean for employers? It means now is the time to rethink your pharmacy benefits strategy, because waiting for legislative change might leave you playing catch-up while competitors get ahead with a more transparent, cost-effective approach.
The PBM Model Under Fire
Pharmacy benefit managers were initially designed to negotiate drug prices on behalf of employers, insurers, and government programs, aiming to reduce prescription costs. However, the reality is that many traditional PBMs profit from the very system they were meant to control. Instead of passing negotiated savings directly to employers and employees, many PBMs secure rebates from drug manufacturers, impose spread pricing, and collect fees that drive up costs.
Even employers who believe they are getting a good deal on prescription drug benefits often find themselves caught in a complex web of contractual loopholes and undisclosed markups. This lack of transparency has left many organizations overpaying for prescriptions without realizing it.
The Growing Demand for Change
In his recent remarks, Kennedy highlighted the Trump administration’s commitment to PBM reform over the next four years. The push for greater transparency in pharmaceutical pricing has bipartisan support, with policymakers recognizing that the current model is unsustainable.
Several proposed reforms are gaining attention:
- Eliminating hidden PBM rebates: Some proposals call for manufacturers’ rebates to go directly to patients rather than PBMs.
- Mandating transparency in PBM contracts: Employers and plan sponsors should be able to see exactly where their money is going.
- Ending spread pricing: PBMs often charge insurers and employers more than they reimburse pharmacies, pocketing the difference. Reform efforts seek to stop this practice.
For employers, this is a pivotal moment. Businesses that rely on traditional PBM contracts may soon find themselves facing significant changes in their pharmacy benefits. Those who are proactive in adopting a more transparent approach now will be ahead of the curve as reforms take shape.
A Better Approach: Transparent PBMs
Rather than waiting for legislative changes, some forward-thinking employers are already turning to transparent pharmacy benefit managers that pass savings directly to employees and eliminate conflicts of interest. Our brokerage has long recognized the importance of integrity in pharmacy benefits management, and we’ve partnered with PBMs that operate under a different model.
Here’s what fully transparent PBMs offer:
- No hidden fees or rebates: They have sworn off drug company rebates that artificially inflate medication costs.
- Pass-through pricing: Employers and employees pay exactly what the PBM pays for the drug — no markups, no hidden margins.
- Real cost savings: Without built-in financial incentives to favor higher-priced drugs, transparent PBMs prioritize lower-cost, clinically effective medications.
- Clearer decision-making for employers: When companies know exactly what they are paying for prescriptions, they can make more informed choices about their benefits.
What Employers Should Do Now
If PBM reform is imminent, why should employers act now rather than wait? The simple answer: Even without new regulations, a more transparent approach will save money and improve employee satisfaction today.
Here’s how companies can stay ahead:
- Review existing PBM contracts: Many traditional PBM agreements contain complex pricing models that disguise costs. Conduct an audit to uncover hidden fees and assess potential savings.
- Consider switching to a transparent PBM: Employers can proactively eliminate unnecessary costs by choosing a PBM that aligns with their financial and ethical priorities.
- Educate employees on prescription benefits: Transparency in PBM pricing means little if employees don’t understand how to access cost-effective medications. Employers should offer education sessions, online tools, and one-on-one support to help employees make informed choices.
- Monitor legislative developments: While reform isn’t guaranteed, keeping an eye on federal and state-level initiatives can help employers adjust their strategies accordingly.
The pressure to reform PBMs is growing, and employers have a unique opportunity to get ahead of the curve. By adopting transparent pharmacy benefit models now, businesses can reduce costs, ensure fair pricing for employees, and bring integrity back into prescription drug coverage.
As policymakers continue their push for change, companies that have already embraced transparency will be better positioned to navigate the evolving landscape. Rather than being reactive to regulatory shifts, they will be leaders in providing cost-effective, employee-friendly benefits — a move that pays off in both financial savings and workforce satisfaction.
The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the U.S. For more information, visit our website or call 877-440-3304.
This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.