Prescription drug costs are rising faster than almost any other component of employer-sponsored health plans. For many companies, pharmacy spend is now one of the top drivers of annual renewal increases. For employees, it shows up as higher payroll deductions, larger deductibles, and unexpected pharmacy bills.
So what’s actually happening — and more importantly, what can employers and employees do about rising prescription drug costs?
Why Are Prescription Drug Costs Increasing?
Several structural factors are pushing pharmacy costs higher across the U.S. healthcare system.
1. Specialty Drugs Are Driving the Surge
Specialty medications — used to treat complex conditions like cancer, autoimmune disorders, and multiple sclerosis — now account for a significant portion of total pharmacy spend, even though only a small percentage of members use them.
Many specialty drugs cost thousands (sometimes tens of thousands) of dollars per month. Even one claimant can dramatically impact an employer’s overall health plan spend.
2. GLP-1 Medications Are Changing the Landscape
Drugs like:
- Ozempic
- Wegovy
- Mounjaro
have transformed diabetes and weight-loss treatment — but they’ve also created significant cost pressure.
When widely adopted, GLP-1 medications can add millions to a large employer’s pharmacy spend. Many carriers are now adjusting coverage rules, adding prior authorization requirements, or excluding certain uses altogether.
3. Pharmacy Benefit Managers (PBMs) Add Complexity
Pharmacy Benefit Managers (PBMs) negotiate pricing between drug manufacturers, pharmacies, and health plans. While PBMs can secure rebates and discounts, the pricing structure is often opaque.
Rebate-driven models may incentivize higher list prices. That can mean:
- Higher gross drug costs
- Increased employer plan spend
- Confusion around what employees actually pay
4. Brand-Name Drugs vs. Generics and Biosimilars
Brand-name medications typically cost significantly more than generic alternatives. Even when generics exist, utilization doesn’t always shift quickly.
Biosimilars — lower-cost alternatives to certain biologic drugs — are entering the market and adoption varies by carrier and formulary strategy.
How Rising Prescription Costs Impact Employers
For employers offering group health insurance, increasing pharmacy spend can lead to:
- Higher annual renewal rates
- Increased stop-loss premiums (for self-funded plans)
- Plan design changes (higher deductibles or cost-sharing)
- Coverage exclusions
Prescription costs don’t just affect the pharmacy line item — they influence total medical trend and long-term plan sustainability.
What Employers Can Do to Control Prescription Drug Costs
Employers are not powerless. Strategic oversight makes a difference.
1. Review Your PBM Contract
Audit:
- Rebate pass-through terms
- Spread pricing practices
- Specialty drug markups
- Dispensing fees
Transparency matters. Many employers don’t realize what’s negotiable.
2. Evaluate Formulary Strategy
Work with your broker or consultant to assess:
- Tier structures
- Prior authorization requirements
- Step therapy protocols
- GLP-1 coverage policies
Small plan design adjustments can significantly reduce overall pharmacy spend.
3. Promote Biosimilars and Generics
Encourage employees during Open Enrollment to talk with their doctors about whether a generic or lower-cost alternative would work for them instead of a brand-name medication. Many plans offer lower copays for generics and biosimilars, which can significantly reduce both employee out-of-pocket costs and overall plan spending.
4. Implement Pharmacy Education for Employees
Employees often don’t understand:
- How formularies work
- Why prior authorization is required
- The cost difference between brand and generic medications
Education reduces frustration and improves cost-conscious decision-making.
What Employees Can Do to Lower Prescription Costs
Employees also play a role in managing prescription expenses.
Ask About Generic Alternatives
Before filling a prescription, ask your provider or pharmacist if a generic option is available.
Use Mail Order When Appropriate
Mail-order programs can reduce costs for maintenance medications and provide 90-day supply discounts.
Compare Pharmacy Pricing
Tools like GoodRx and carrier-specific cost comparison tools may reveal price differences between pharmacies.
Understand Your Plan’s Coverage Rules
Prior authorization and step therapy requirements are common — and often misunderstood. Knowing the rules ahead of time prevents delays and surprise costs.
The Bigger Picture: Sustainable Health Plans
Prescription drug spending is not slowing down. Specialty drugs and GLP-1 medications will likely continue shaping employer health plan costs for years to come.
If your health plan renewals have felt higher than expected, prescription drug costs may be a major contributor. The key isn’t eliminating access — it’s balancing cost management with responsible coverage decisions.
Employers who proactively evaluate pharmacy strategy, improve transparency, and educate employees are far better positioned to control long-term health plan expenses.
📞 Need help understanding your coverage? If you have questions about your health insurance or prescription costs, we’re here to help you navigate it clearly and confidently. Contact us today.
Sources
- Kaiser Family Foundation. “Prescription Drug Spending in the U.S.” KFF, 2024, https://www.kff.org/health-costs/issue-brief/prescription-drug-spending-in-the-u-s/. Accessed 18 Feb. 2026.
- Centers for Medicare & Medicaid Services. “National Health Expenditure Data: Prescription Drugs.” CMS, 2024, https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data. Accessed 18 Feb. 2026.
- U.S. Food & Drug Administration. “Generic Drugs: Questions & Answers.” FDA, 2024, https://www.fda.gov/drugs/questions-answers/generic-drugs-questions-answers. Accessed 18 Feb. 2026.
- U.S. Food & Drug Administration. “Biosimilar and Interchangeable Products.” FDA, 2024, https://www.fda.gov/drugs/biosimilars/biosimilar-and-interchangeable-products. Accessed 18 Feb. 2026.
- Kaiser Family Foundation. “Explaining the Prescription Drug Pricing System.” KFF, 2023, https://www.kff.org/health-costs/issue-brief/explaining-the-prescription-drug-pricing-system/. Accessed 18 Feb. 2026.
- IQVIA Institute for Human Data Science. “The Use of Medicines in the U.S.” IQVIA, 2024, https://www.iqvia.com/insights/the-iqvia-institute/reports-and-publications/reports/the-use-of-medicines-in-the-us. Accessed 18 Feb. 2026.
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