Pharmacy spending has become one of the fastest-growing and most significant components of employer health plans – reshaping budgets, driving volatility in renewals, and presenting new challenges related to access, affordability, and long-term plan sustainability.
Over the past several years, pharmacy has steadily expanded from a modest portion of total medical spend to 30% or more for many employers. In some cases, primarily driven by specialty medications and emerging drug classes, it has reached nearly half of all plan costs.
In our November Health Risk Management webinar, guest expert Shawn Shapiro of Meritain Pharmacy Solutions (MPS) helped unpack what employers need to know about today’s pharmacy landscape. Shapiro explored the fundamentals of how pharmacy benefit managers (PBMs) operate, the mechanics behind pricing and rebates, the rising influence of specialty drugs and biosimilars, and the growing cost pressures tied to GLP-1 medications.
Shapiro’s presentation emphasized practical, high-impact strategies that employers — particularly those in group captives — can implement now to navigate a rapidly evolving market.
The U.S. drug market involves insurers, PBMs, pharmacies, wholesalers, manufacturers, and regulators, with PBMs at the center — shaping coverage, pricing, networks, and member access. Costs often feel unpredictable because many factors operate behind the scenes, from clinical rules to contracting practices. Understanding these dynamics is crucial for managing both immediate pressures and long-term risks.
A plan’s formulary determines which drugs are covered, how they’re tiered, and what oversight applies.
Tiering also matters. Many employers now use four tiers, placing specialty drugs in a separate category for clearer cost-sharing and tighter management. When paired with step therapy, prior authorization, and quantity limits, formulary design becomes one of the most effective ways to guide members toward safe, lower-cost options.
Drug pricing is shaped by benchmark prices, negotiated discounts, and manufacturer rebates; however, visibility into these factors is often limited. Rebates apply only to certain brand drugs and vary widely based on utilization and PBM contracting.
A key takeaway: lowest-net-cost is not always “generic.” A highly rebated brand drug may ultimately cost less than its generic equivalent. Employers should look for:
These protections help ensure PBM performance aligns with employer expectations, especially for groups new to self-funding.
The increasing use of generics continues to drive meaningful savings. For every 1% increase in generic dispensing, plans can reduce net costs by up to 2%. Benefit design, clinical programs, and provider engagement all help ensure generics are considered when appropriate.
Specialty medications represent a small fraction of prescriptions but a disproportionate share of total spending. These therapies often require special handling, clinical oversight, and limited distribution — and they treat many of the most complex conditions. As a result, they continue to be a significant source of volatility for employer plans.
The goal isn’t to restrict access, but to ensure appropriate use and secure the lowest possible net cost. One of the most effective emerging levers is the use of biosimilars.
Biosimilars are FDA-approved alternatives to biologic drugs that deliver the same safety and clinical outcomes at significantly lower prices. As more enter the market — especially in high-spend categories like immunology, ophthalmology, and oncology — employers are seeing meaningful opportunities to reduce high-severity claims.
Recent biosimilar launches have led to cost reductions of over 80%. A biosimilar-forward formulary strategy, supported by strong clinical review and clear exception processes, can significantly lower specialty spend while maintaining continuity of care.
GLP-1 medications have transformed treatment conversations around diabetes, obesity, and cardiometabolic health. They deliver substantial clinical benefits but also raise questions about long-term affordability and plan sustainability.
Shapiro’s presentation focused on three areas:
According to Shapiro, more than 70% of self-funded employers do not cover GLP-1s for weight loss. Coverage decisions should consider population needs, productivity impacts, industry expectations, and total cost of care.
Utilization management tools — including prior authorization, quantity limits, step therapy, and formulary placement — help ensure the appropriate use of medications and prevent off-label prescribing.
GLP-1s work best when paired with nutrition and lifestyle support. Integrating behavioral coaching with medical oversight can improve outcomes and potentially reduce long-term reliance on medication.
In group captives, shared strategy and collective discipline create meaningful advantages. Employers can work together to:
When pharmacy management becomes a strategic priority, cost trends stabilize, and member outcomes improve.
As we move into 2026, pharmacy will continue to be a defining force in employer health plan performance. With the right strategies — from generics and biosimilars to GLP-1 governance and clinical integration — employers can navigate this landscape with greater confidence and long-term sustainability. We look forward to continuing the conversation in the new year and supporting strong, predictable plan performance across the captive.
This presentation was part of Captive Resources’ Medical Stop Loss (MSL) Webinar Series — regular installments of webinars to educate MSL group captive members. The thoughts and opinions expressed in these webinars are those of the presenters and do not necessarily reflect Captive Resources’ positions on any of the above topics.
