If PBM prescription drug costs are rising, start by comparing pharmacy spending with prescription use. If employees are filling about the same number of prescriptions but the plan is paying more, review specialty drug costs, rebates, PBM fees, spread pricing, and the plan’s net pharmacy cost. A large increase without a similar increase in prescription use does not prove the PBM is responsible, but it is a good reason to review the claims data and contract before renewal.
How Can Employers Tell Why Pharmacy Costs Went Up?
A higher pharmacy bill does not automatically mean the PBM is the problem. Employees may be filling more prescriptions, starting expensive medications, or using more specialty drugs. The cost of individual medications can also change.
Compare the current plan year with the previous one. Look at prescription volume, total pharmacy spending, major drug cost drivers, and specialty drug claims.
For example, if prescription use stays relatively steady but total pharmacy spending rises sharply, higher utilization alone does not explain the increase. That is a reason to look more closely at the medications driving costs and how the pharmacy benefit is priced.
Are Specialty Drugs Driving the Increase?
Specialty medications can have a large effect on an employer health plan even when only a few employees use them.
A Bucks County employer could have stable overall prescription use and still see pharmacy spending climb after one or two employees begin expensive specialty treatments. The claims may be legitimate, but the employer should still understand the pricing, pharmacy requirements, and available plan-management options.
Some PBMs are connected with specialty pharmacies, and certain plans require specialty medications to be filled through specific pharmacies. Employers should understand whether those arrangements affect what the plan ultimately pays.
It may also be worth asking whether biosimilars or other lower-cost alternatives are available when medically appropriate. Treatment decisions should remain between employees and their healthcare providers.
Are Bigger Drug Rebates Always Better?
No. A larger rebate does not automatically mean a drug or PBM arrangement costs the health plan less.
Imagine one medication carries a large rebate but starts at a much higher price than another clinically appropriate option. Even after the rebate is applied, the first medication could still cost the plan more.
Instead of focusing only on the rebate percentage or guarantee, employers should ask:
What does the plan ultimately pay after rebates, discounts, fees, and other applicable credits?
That number provides a better view of the real pharmacy cost.
How Does the PBM Get Paid?
PBMs can receive compensation in different ways depending on the contract. That may include administrative fees, rebate arrangements, pharmacy pricing, specialty pharmacy revenue, or other payments.
One term employers may encounter is spread pricing. This generally refers to the difference between what the health plan pays the PBM for a prescription and what the PBM pays the pharmacy.
Another model is often described as pass-through pricing, where agreed pharmacy costs and certain rebates or discounts are passed through to the health plan. However, a pass-through arrangement can still include administrative fees and other contract terms that employers need to review.
Neither model should be judged by its label alone. The goal is to understand how the PBM makes money and what the health plan pays overall.
What Is the Plan’s Net Pharmacy Cost?
PBM contracts can include rebates, discounts, administrative fees, pricing guarantees, pharmacy reimbursements, and other credits. Looking at one item by itself can make two arrangements appear more different than they really are.
A more useful comparison is the plan’s net pharmacy cost, meaning the amount the plan ultimately pays after applicable rebates, discounts, fees, and credits are considered.
For example, one PBM may advertise larger discounts but charge higher fees. Another may offer smaller headline discounts while producing a lower overall cost.
The goal is not to find the biggest rebate. It is to understand what the plan actually pays.
What Should Bucks County Employers Know About Pennsylvania PBM Rules?
Pennsylvania has increased its oversight of pharmacy benefit managers. The state’s Pharmacy Benefit Reform Act, or Act 77 of 2024, added licensing, reporting, transparency, and other requirements affecting certain PBM arrangements.
Many of the state’s insurance requirements apply to fully insured Pennsylvania health plans. Self-funded employer plans generally are not regulated by Pennsylvania insurance law in the same way because federal rules can preempt state insurance requirements.
Level-funded arrangements can be more complicated, so employers should confirm how the plan is legally structured before assuming a particular Pennsylvania requirement applies.
Pennsylvania’s PBM transparency requirements also became more significant in 2026, with reporting covering areas such as rebates, administrative fees, retained payments, and certain affiliated arrangements.
For employers in Doylestown and throughout Bucks County, the practical takeaway is simple: know how your health plan is funded before evaluating which PBM rules and reporting requirements apply.
What Should Employers Review Before a PBM Renewal?
Before accepting a renewal, employers should be able to explain why pharmacy spending changed, which medications are driving the increase, how specialty drugs affect the plan, how the PBM is compensated, and what the plan pays after rebates and fees.
For example, a Bucks County employer may receive a renewal showing a large pharmacy increase even though prescription volume barely changed. A closer review might show that most of the increase came from a small number of specialty medications.
That gives the employer something specific to investigate. Instead of reacting only to the final renewal percentage, the company can review specialty pharmacy pricing, rebate terms, PBM fees, pharmacy requirements, and net cost.
PBM review can be especially useful for level-funded and self-funded employers because pharmacy claims and contract terms may have a more direct effect on overall plan costs.
What PBM Cost Warning Signs Should Employers Watch For?
A higher pharmacy bill by itself is not necessarily a warning sign. A higher bill that cannot be clearly explained deserves closer attention.
Employers should ask more questions when prescription volume remains fairly steady while spending rises, specialty drug pricing is unclear, PBM fees are difficult to identify, or rebate information cannot be reconciled with the plan’s actual cost.
Another concern is a renewal presentation that focuses heavily on discount percentages and rebate guarantees but does not clearly show the employer’s net pharmacy spending.
If the reports do not make the cost drivers understandable, ask for additional claims data and contract information before making a renewal decision.
Should a Bucks County Employer Change PBMs?
Not automatically. The first step is understanding what is actually causing pharmacy costs to rise.
In some cases, higher spending reflects legitimate changes in employee healthcare needs. In others, specialty drug pricing, PBM fees, rebate terms, pharmacy requirements, or limited reporting may be contributing to the increase.
Reviewing or renegotiating the current arrangement may make more sense than switching. If the employer cannot obtain the information, transparency, or contract terms it needs, comparing other PBM options may become reasonable.
PBM contracts vary widely, so employers should evaluate the complete arrangement rather than changing vendors based on one pricing feature.
What Do Employers Ask About PBM Prescription Drug Costs?
Employers should request enough information to understand total pharmacy spending, prescription utilization, specialty drug costs, major cost drivers, rebates, PBM fees, and overall net cost. The level of reporting available can vary based on the health plan, funding arrangement, and PBM contract.
Spread pricing generally refers to the difference between what a health plan pays the PBM for a prescription and what the PBM pays the pharmacy. Employers should review their contract to determine whether spread pricing applies and how it affects total pharmacy spending.
Pass-through pricing generally means agreed pharmacy costs and certain rebates or discounts are passed through to the health plan rather than retained as spread. Employers should still review administrative fees, specialty pharmacy arrangements, and other contract terms before comparing PBMs.
No. A medication or PBM arrangement with a larger rebate can still cost the health plan more overall. Employers should compare the final cost after rebates, discounts, fees, and applicable credits rather than evaluating rebate size alone.
No. Higher costs can result from greater prescription use, specialty medications, changes in drug prices, employee healthcare needs, or the PBM arrangement itself. Reviewing claims data and contract terms helps identify which factors are actually driving the increase.
Need Help Reviewing Your PBM Prescription Drug Costs?
If pharmacy spending is increasing and the reason is unclear, reviewing the numbers before renewal can help separate legitimate claim changes from pricing and contract issues.
JS Benefits Group works with Pennsylvania employers on PBM management, healthcare cost strategies, plan funding, and employee benefits planning. A PBM review can look at prescription spending, specialty drugs, rebates, fees, pharmacy arrangements, and contract terms to give employers a clearer picture of what is driving pharmacy costs.
Before accepting your next renewal, contact JS Benefits Group to review your PBM contract, pharmacy claims, rebates, and specialty drug spending.
