In part one of this series, we explored why pharmacy benefit transparency has become a governance issue for HR leaders and why surface-level disclosure often fails to reveal how costs and incentives actually work. This installment focuses on where employers have more leverage than they realize—and how to apply it deliberately in the best interest of plan participants.
If employers hold the purse strings, why don’t they push harder for transparency and better terms?
Part of the answer is that pharmacy benefits have evolved into a highly specialized and increasingly complex ecosystem, shaped by pharmacy benefit managers (PBMs) whose roles span clinical decision-making, pricing strategy and vendor incentives. As prescription drug economics have grown more opaque and financially consequential, oversight has expanded well beyond traditional benefit administration. What was once a relatively contained component of the health plan now requires understanding rebate structures, pricing methodologies and contractual mechanics that even experienced benefits professionals may not encounter elsewhere in their work. That complexity has practical consequences for how much leverage employers actually have—and where they have it.
It is easy to assume that size alone gives large employers meaningful negotiating leverage in pharmacy benefits. In reality, that advantage can erode when size comes with a broad geographic footprint. Healthcare pricing remains highly localized, and an employer with tens or hundreds of thousands of employees spread across dozens of metro areas may have limited influence in any single market. Moreover, coalitions and shared purchasing groups, which were supposed to aggregate buying power, have mostly fallen out of favor with large employers because of the unpredictable nature of shared risk. A severe condition in one employer’s workforce can materially affect costs for all members, undermining predictability and making long-term budgeting difficult.
See also: 5 secrets to finding a PBM that puts employees first
HIPAA boundaries create another layer of hesitation. Employers have been reluctant to review detailed claims or identify high-cost claimants, even when doing so might reveal opportunities for better plan management. For example, an employer may avoid examining certain pharmacy claims for fear it could be interpreted as linking a specific employee to a high-cost condition, even if the intent is simply to evaluate plan performance and confirm that benefits are being used as designed to support participants.
From a broader perspective, the system feels too large, too confusing and too entrenched to change. Brokers present standard contracts; PBMs set the terms. In many cases, standard offerings from carriers or PBMs appear reasonable on the surface, and without full visibility into pricing structures, it can be difficult to know what should be questioned.
But employers have more leverage than they realize. They just need to push beyond the standard contract and ask harder questions.
What employers can do
Pharmacy transparency isn’t about becoming an expert in drug pricing or PBM operations. It’s about responsible stewardship of the plan and the people it serves. Here are some practical steps employers can take.
- Carve out pharmacy from medical benefits: Separating pharmacy from medical benefits creates clearer lines of accountability and visibility into spend. While it introduces additional administrative considerations and requires careful employee communication, a pharmacy carve-out gives employers greater control over pricing structures and performance evaluation, making it easier to align the benefit with governance goals. Employers should also recognize that many carriers own both PBMs and group purchasing organizations, which can complicate efforts to fully separate incentives.
- Demand deeper contract transparency: Or better yet, establish contract terms that PBMs must adhere to, rather than defaulting to theirs. The focus should be on how prescriptions are priced and what their true net cost is, not simply whether rebates exist. A PBM may describe an arrangement as “transparent,” but that does not necessarily mean it is designed to lower net cost. Beyond reviewing headline terms, employers need to understand not just who is being paid and how much, but how pricing mechanics affect participants at the point of sale. Asking direct questions about rebates, administrative and other fees, pricing methodology and audit rights is not adversarial; it is often the only way for employers to determine whether the benefit is working as intended.
- Secure access to claims-level data: Claims-level visibility, particularly before or shortly after adjudication, allows employers to identify pricing anomalies, coding issues and misalignments between benefit design and real-world outcomes, including differences experienced by participants who are in versus out of the deductible phase. This visibility matters because billing errors are not rare; a 2024 JAMA Health Forum study found that one in five Americans received a problematic medical bill. Independent claims reviews can help surface and address these issues without placing undue burden on HR teams.
- Evaluate alternative pharmacy pricing models: Net-price, cost-plus, and even cash-based models reduce reliance on rebate-driven economics by tying pricing more directly to acquisition cost plus a defined administrative fee. While not appropriate for every employer, these alternatives can improve predictability and reduce incentive misalignment for plans seeking greater clarity and control over pharmacy spend.
- Support participants with targeted advocacy and savings tools: Member advocacy services, cash-price comparison requirements and digital savings tools can help employees navigate pharmacy benefits more effectively—particularly those managing chronic or high-cost conditions. Success depends on trust, transparency and clear communication around data use, but when implemented well, these tools improve both affordability and engagement.
Raising the bar on industry responsibility
Pharmacy benefit transparency is no longer an abstract policy debate. As costs rise and scrutiny increases, HR leaders are being asked to engage more directly with how pharmacy benefits actually function. That does not mean becoming experts in drug pricing. It means understanding enough to ask better questions, make more informed decisions and clearly explain why the plan is structured the way it is—and whether it is working in the best interest of participants. Across both parts of this series, the message is simple: Transparency for transparency’s sake is not the goal. Fiduciaries need to know, understand and be able to manage how their plan operates. That is what enables employers to manage pharmacy benefits with greater clarity, intention and care for the people they serve.
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