Prescription drug spending has become one of the least transparent and most volatile parts of employer-sponsored health plans. The problem is not only that some drugs are expensive. It is that plan sponsors often do not have a clear line of sight into what is being covered, where it is being dispensed or administered, how exceptions are being approved, and what the plan is actually paying after rebates, markups, and channel decisions. FTC reporting shows specialty drug spending more than doubled from $113 billion in 2016 to $237 billion in 2023, while pharmacies affiliated with the three largest PBMs received 68% of the dispensing revenue generated by specialty drugs in 2023. The FTC also reports that the three largest PBMs manage nearly 80% of all prescriptions filled in the United States, giving them substantial influence over access and pricing. (Federal Trade Commission)
The takeaway for plan sponsors is straightforward: pharmacy cost control cannot be treated as a black box. It requires governance, data transparency, and active financial management.
Why prescription drug cost control often fails
Many plans focus on discounts, rebate percentages, or annual renewal guarantees. Those items matter, but they do not answer the most important question: what is the plan’s true net cost, and was the drug delivered through the most clinically appropriate and financially efficient pathway?
One reason this is difficult is that there is no single universal definition of a “specialty drug.” The FTC notes that specialty drugs were historically associated with special handling and administration, but today they are often defined largely by high cost. That ambiguity creates room for inconsistent classification, channel steering, and unclear accountability. (Federal Trade Commission)
A second problem is vertical integration. The FTC’s PBM reports describe a market in which PBMs, health plans, and affiliated pharmacies can sit at multiple points in the same transaction. In its 2024 interim report, the FTC stated that internal documents suggested some specialty designations were created “to allow PBMs to drive a significant percentage of specialty pharmacy revenue to payer-affiliated specialty pharmacies.” That does not mean every specialty arrangement is inappropriate, but it does mean employers should insist on auditable economics and clear contract rights. (Federal Trade Commission)
A third issue is that many high-cost therapies are billed under the medical benefit, not just the pharmacy benefit. For infusion therapies, site of care can materially change cost. A 2025 study summary published by Elevance Health, citing research in the Journal of Managed Care & Specialty Pharmacy, found that non-oncologic infusion therapies delivered in hospital outpatient departments had similar safety and quality outcomes but outpatient costs that were more than 40% higher than clinically appropriate alternative sites of care. (www.elevancehealth.com)
Finally, plans lose discipline when exceptions accumulate. Formularies are not supposed to be ad hoc. AMCP explains that formularies are typically determined and managed by a pharmacy and therapeutics committee, which also reviews utilization management tools such as prior authorization, step therapy, quantity limits, and medical exception protocols. When those governance processes are weak, exceptions stop being exceptions and become a hidden expansion of plan cost. (AMCP)
The real issue is not list price alone
List price matters because it shows the scale of exposure, but it is not the same as what a member pays or even what a plan ultimately pays. Manufacturer pricing pages make that clear. Bristol Myers Squibb states that the list price for a 30-day supply of Eliquis is $346, while NovoCare lists Ozempic at $1,027.51 for common pen configurations and notes that most insured patients do not pay list price. AbbVie lists Skyrizi at $23,838.42 per dose. Merck’s published wholesale acquisition cost sheet lists Keytruda at $12,031.36 for a carton of two 100 mg vials and $24,062.72 for one 790 mg subcutaneous configuration. (Eliquis Customer Connect)
At the extreme end of the spectrum, one-time gene therapies can create plan-level shock losses. Novartis lists Zolgensma at a wholesale acquisition cost of $2.125 million. Bluebird bio announced Zynteglo at $2.8 million. CSL’s product fact sheet lists Hemgenix at $3.5 million. Orchard Therapeutics announced Lenmeldy at a wholesale acquisition cost of $4.25 million. These are not hypothetical exposures; they are real price points already in the market. (Novartis)
That is why employers should stop evaluating pharmacy performance primarily through rebate language. A drug with a large rebate can still be more expensive than a lower-list-price alternative. And a medically billed therapy delivered in the wrong setting can erase any savings that appear on paper.
A practical solution framework for plan sponsors
1. Demand transparent economics
The plan sponsor should require a contract structure that allows it to understand ingredient cost, dispensing fees, spread, retained rebate amounts, administrative fees, and specialty pharmacy routing logic. The goal is not simply “more reporting.” The goal is the ability to reconcile what the contract promised against what the claim actually cost.
At minimum, plan sponsors should require:
- pass-through definitions that are auditable,
- disclosure of affiliated entities,
- data rights at the claim level,
- clear ownership of rebate and fee streams,
- and the ability to review specialty pharmacy steering and medical-benefit drug channel decisions.
2. Establish a formal specialty drug definition
Because there is no standard industry definition, each plan should adopt its own operational definition of “specialty” for governance purposes. That definition should be based on a combination of cost threshold, clinical complexity, route of administration, handling requirements, and financial risk to the plan. The point is consistency. A plan cannot govern what it has not clearly defined. (Federal Trade Commission)
3. Put formulary and exception decisions into a disciplined governance process
AMCP’s framework is useful here: formularies and access rules should be managed through a P&T structure or equivalent governance body, with written criteria for prior authorization, step therapy, quantity limits, and medical exceptions. The plan sponsor should not try to practice medicine, but it should define the financial guardrails, approval thresholds, documentation standards, and escalation process. (AMCP)
A workable model is:
- clinical review for medical necessity,
- financial review for net cost and channel appropriateness,
- committee review for nonstandard exceptions,
- and written documentation for every variance from standard policy.
4. Optimize site of care for medically billed drugs
For infused and provider-administered therapies, employers should not assume hospital outpatient departments are the default. When clinically appropriate, physician offices, ambulatory infusion centers, and home infusion may offer comparable outcomes at materially lower cost. That should be built into prior authorization and care-navigation workflows, not handled after the fact as a claims clean-up exercise. (www.elevancehealth.com)
5. Build a biosimilar and therapeutic-alternative strategy
Biologics are a major and growing cost driver, and FDA states that biosimilars are intended to increase competition and lower costs. HHS OIG found that biosimilar competition has already lowered costs in Medicare Part B and estimated that spending could have been reduced further through greater use of more affordable biosimilars. Employers should therefore review where biosimilars, lower-cost therapeutic alternatives, or revised utilization rules can be adopted without compromising clinical quality. (U.S. Food and Drug Administration)
6. Prepare now for gene and cell therapy exposure
High-cost one-time therapies require a financing and governance strategy before the claim arrives. Manufacturers themselves have used outcomes-based and staged-payment models for some of these therapies. Plans should evaluate stop-loss terms, lasers, exclusions, reimbursement timing, and whether a separate high-cost therapy policy is needed. The right time to solve for a $2 million to $4 million claim is before the authorization request lands. (Novartis)
7. Support members with real navigation
Members should not be left to figure out specialty access, site-of-care rules, prior authorization requirements, and manufacturer assistance on their own. A sound program includes proactive outreach, coordination with prescribers, support for appeals where appropriate, and a clear communication path so members understand both their options and the reasons behind plan rules.
How to measure whether the program is working
Instead of unsupported headline metrics, plans should track a small set of defensible operating measures:
- specialty spend by drug, diagnosis, and channel,
- pharmacy-benefit versus medical-benefit specialty trend,
- hospital outpatient versus alternate site utilization,
- prior authorization approval and turnaround times,
- exception volume and exception-overturn rate,
- biosimilar adoption where clinically appropriate,
- net cost per treated member for top specialty categories,
- and large-claim exposure for gene and cell therapies.
Those metrics give the employer something more valuable than a rebate summary: they create a repeatable management discipline.
Conclusion
Prescription drug spending does not improve simply because a PBM contract exists or because a plan receives rebates. It improves when the employer has visibility into true net cost, formal rules for how specialty drugs are defined and approved, active management of site of care, and a documented governance process for exceptions and high-cost therapies. The market is too concentrated, the economics are too opaque, and the stakes are too large for passive oversight. FTC findings, FDA policy, HHS OIG analysis, and manufacturer pricing disclosures all point to the same conclusion: employers need a more disciplined, evidence-based model for managing drug spend. (Federal Trade Commission)
For organizations looking to better understand how transparency, oversight, and structured governance can improve pharmacy cost management, an interactive guide is available that explores key concepts such as specialty drug definitions, net cost visibility, site-of-care optimization, and exception discipline. The guide provides a practical overview of how employers can bring greater structure and accountability to prescription drug spending. Explore the guide here: https://march2026.ubfhealthsolutions.com/
Sources
- Federal Trade Commission, Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies. (Federal Trade Commission)
- Federal Trade Commission, Specialty Generic Drugs: A Growing Profit Center for Vertically Integrated Pharmacy Benefit Managers. (Federal Trade Commission)
- Academy of Managed Care Pharmacy, Formulary Management. (AMCP)
- Elevance Health Public Policy Institute / JMCP study summary, Infusion Therapy Quality and Cost Outcomes by Site of Care. (www.elevancehealth.com)
- FDA, Biological Product Innovation and Competition. (U.S. Food and Drug Administration)
- HHS Office of Inspector General, Biosimilars Have Lowered Costs for Medicare Part B and Enrollees, but Opportunities for Substantial Spending Reductions Still Exist. (HHS OIG)
- Bristol Myers Squibb / Pfizer, Eliquis pricing page. (Eliquis Customer Connect)
- NovoCare, Ozempic list price page. (NovoCare)
- AbbVie, Skyrizi cost page. (Skyrizi)
- Merck, Keytruda wholesale acquisition cost sheet. (merckconnect-global)
- Novartis, Zolgensma pricing and access announcement. (Novartis)
- bluebird bio, Zynteglo U.S. commercial announcement. (Business Wire)
- CSL Behring, Hemgenix product fact sheet. (Labeling)
- Orchard Therapeutics, Lenmeldy U.S. launch plans. (Orchard, TX)
