The Rising Cost of Prescriptions: What HR and Compliance Leaders Need to Know Before Open Enrollment
Prescription drug costs are now one of the primary drivers of employer healthcare spend — and for many organizations, they're the area with the least oversight.
Specialty medications, biologics, and high-cost maintenance drugs have shifted from a line item to a plan management priority. The 2025 KFF Employer Health Benefits Survey found that among large firms, prescription drug spending is now the top cited driver of rising premiums. Employee benefits cost containment strategies that address medical utilization while leaving pharmacy unexamined are leaving money on the table. In some cases, a significant amount of it.
The concentration of pharmacy cost in a small percentage of claims isn't an outlier story. It's a structural feature of how pharmacy benefits are currently designed at most organizations — one that HR leaders and finance need to understand before open enrollment decisions are finalized.
Here's where the exposure is, and what to do about it.
The Cost Drivers That Don't Show Up Until Renewal
Prescription cost increases don't always present as high-cost individual claims. They accumulate in plan architecture decisions that go unreviewed year after year.
The most common pharmacy cost drivers operating below the radar:
PBM contracts with structural misalignment. Pharmacy benefit managers negotiate drug pricing and manage formularies on behalf of plan sponsors. Many contracts include spread pricing arrangements — where the PBM charges the plan more than it pays the pharmacy and captures the difference without disclosure — and rebate structures that don't flow back to the employer in proportion to what was negotiated. An unreviewed PBM contract is an employee benefits cost containment gap that typically grows over time.
Specialty drug spend without utilization management. Specialty medications are often the fastest-growing segment of pharmacy spend. Without prior authorization requirements, step therapy protocols, and specialty pharmacy channel requirements, these costs are largely unmanaged. Many employers discover the scale of their specialty spend only when it shows up as an unexplained renewal spike.
Limited generic substitution. Not every plan is optimized to direct members toward generic alternatives when clinically equivalent options exist. Formulary design decisions made years ago may not reflect current generic availability — driving avoidable brand-drug spending month after month.
Employee decisions made without cost information. Most members select medications at the point of care without knowing the cost difference between their plan's formulary tiers, between retail and mail-order channels, or between in-network and specialty pharmacy options. Uninformed decisions cost money — for the employee and the plan.
Why Pharmacy Is a Compliance Issue, Not Just a Finance Issue
HR and compliance leaders need to be at the table when pharmacy benefits are being reviewed. This isn't only because pharmacy represents a significant cost driver — it's because plan design decisions have compliance implications that are easy to miss.
Key compliance considerations in pharmacy benefit management:
ACA minimum value calculations can be affected by carving out high-cost specialty medications. If your plan design restructures pharmacy benefits in ways that affect minimum value standards, that needs to be assessed before the change is finalized — not after enrollment materials go out.
Employer-funded copay assistance programs need to be structured carefully. If copay assistance payments are not properly classified, they may constitute taxable income to employees — an outcome that creates both tax liability and employee relations problems that are difficult to unwind.
Prior authorization and coverage appeal processes for prescription drugs can implicate HIPAA protected health information. If HR is involved in facilitating appeals or accessing medication information to resolve coverage issues, the process needs to comply with PHI handling requirements.
These aren't edge cases. They're regular features of active pharmacy benefit management that need to be reviewed with legal counsel and benefits advisors before plan changes are implemented.
Building an Employee Pharmacy Education Strategy
The best pharmacy benefit structure in the plan design produces limited results if employees don't know how to use it.
Pharmacy benefit literacy is low across most workforces. The specific gaps that drive avoidable cost:
Most employees don't understand their plan's formulary tier structure — or that the tier of a medication directly determines their out-of-pocket cost. They fill prescriptions at whatever pharmacy is most convenient, unaware that mail-order or preferred pharmacy network options carry meaningfully lower cost sharing.
Prior authorization processes are opaque to most members. When a prior authorization is required and the employee doesn't understand the appeals process, they either abandon the medication — which drives non-adherence and downstream health cost — or escalate to HR, which drives administrative burden.
Copay assistance programs for specialty medications are widely available through manufacturers but largely unknown to employees. These programs can dramatically reduce member out-of-pocket costs and improve adherence — but only if employees know they exist and how to access them.
An employee benefits cost containment strategy that doesn't include pharmacy education is incomplete. Targeted communication about mail-order enrollment, formulary tier differences, and copay assistance availability can shift employee behavior in ways that reduce plan costs without reducing coverage quality.
What a Pharmacy Benefits Review Should Cover
Before open enrollment, the review your broker or advisor should conduct on pharmacy:
PBM contract transparency. Are rebates being fully disclosed and credited back to the plan? Is spread pricing occurring, and if so, at what level? What are the performance guarantees, and has the PBM been held to them?
Formulary structure. Does the current formulary reflect current generic availability and therapeutic alternatives? Are specialty drugs subject to appropriate utilization management — prior authorization, step therapy, quantity limits?
Specialty pharmacy channels. Are high-cost specialty medications being dispensed through specialty pharmacy networks that include clinical management programs, or through retail pharmacies without clinical oversight?
Mail-order penetration. What percentage of maintenance medications are being filled through mail order? Is the plan design creating financial incentives that make mail order the obvious choice, or is utilization of that channel passive?
Member communication. When were pharmacy education materials last updated? Do they reflect current formulary changes, tier structures, and available cost-saving programs?
Employee benefits cost containment in pharmacy isn't about restricting access to medications. It's about ensuring the plan is designed to direct spend toward efficient channels, that the PBM relationship is performing as contracted, and that employees have the information to make cost-effective decisions.
What This Means for Open Enrollment Planning
Open enrollment is when plan design decisions get locked in for the next plan year. Pharmacy benefit changes — formulary updates, PBM contract modifications, specialty tier adjustments — are significantly harder to implement mid-year than at renewal.
The window to make changes that take effect at the start of the plan year is now, before enrollment materials are finalized. Decisions made in September or October about pharmacy structure will govern your plan costs for the next 12 months.
BSP partners with clients to bring visibility to pharmacy cost drivers before they become renewal surprises. We review PBM performance, assess formulary structure, evaluate specialty spend patterns, and help align pharmacy strategy with your broader employee benefits cost containment goals — so open enrollment decisions are made with full information, not gaps.
That's not just better benefits management. That's better business.
Schedule an introductory call to discuss your pharmacy benefit structure, or start with a complimentary benefits review to see where your plan costs have room to improve.
