Getting Value from Pharmacy Benefits in a High-Cost Era

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Nicole: Pharmacy costs are rising faster than many employers can budget for, and for HR leaders, the pressure is only growing. Employees expect affordable access to medications. Organizations need to manage escalating healthcare expenses, and somewhere in the middle sits HR, trying to make decisions that support both people and the bottom line.

Welcome to Honest HR, where we turn real issues facing today's HR departments into honest conversations with actionable insights. Today, we're recording at SHRM26 in Orlando with a live studio audience. Give yourselves a round of applause.

I'm your host, Nicole Belyna. Let's get honest. The challenge when dealing with pharmacy benefits isn't choosing between supporting employees and controlling costs. It's figuring out how to accomplish both. To help us do that, we're joined by two vice presidents of Employee Benefits Consultation. We have Eric Papp of M.E. Wilson Insurance and Eric Porter of SmithRx.

Welcome to Honest HR.

Eric Porter: Thanks for having us.

Nicole: So we'll get started. Pharmacy benefits have traditionally been viewed as a healthcare issue. Why should HR leaders see them as a business issue?

Eric Papp: Great question. When you look at expenses, pharmacy is usually one of the top three or four costs overall. A lot of folks here in Florida are experiencing double-digit increases and feeling like there's nothing they can do — but there is. We just have to start to uncover and unpack it. And when you do, you see that pharmacy is really driving a lot of that.

Pharmacy used to represent maybe 10 or 15% of claims. Now we're seeing in some cases as high as 50% of claims are pharmacy. There is control to be had. I talk to a lot of HR professionals, and one challenge is just getting into the right mindset — even if insurance isn't something you want to deal with, just know that you can. Lean into it. A little time and knowledge can really make a big difference.

Eric Porter: To Eric's point, 10 years ago when SmithRx started, pharmacy was less than 10% of all claims. On average, we're now seeing close to 30% of all healthcare spend on an employer's plan going to pharmacy. And it's only going up. Last year it was about 26 or 27%, and this year we're anticipating over 30%.

The dramatic rise is not just a healthcare issue — it's a business issue, and we need to be conscious of it. Having a strategy, or simply claiming to have a strategy, isn't good enough anymore. You need to actually be executing on it. The cost can run away quickly, and if you're not on top of it, it can get scary fast.

Nicole: It can. So when you talk to employers, what's the biggest misconception they have about what actually drives pharmacy spending?

Eric Porter: I think there are two things. A legacy PBM, or pharmacy benefit manager, has historically made money in different ways, and one of those ways is through rebates. Drug manufacturers often incentivize PBMs to keep high-cost specialty drugs on their plan with a high-dollar rebate. The tractor beam that pulls employers in — and sometimes keeps them stuck — is this rebate number and the rebate guarantee that exists.

Employers need to start asking themselves: What does that actually mean? If we're hitting a guarantee, where's the money coming from, and what does that actually mean for our business? The financial side gets attractive when people see it as fixed income hitting the balance sheet. But ultimately, is there more money being left on the table? What's the total cost to the bottom line?

The second thing I would add is this idea of vertical integration being sold as a benefit to employers. You're with a large health organization — they have everything in-house, they're doing everything for you — when really it's a trap, because they're taking a cut at every single step of the way. When you decouple things and peel back the layers and understand the numbers, you'll see there's money that should be hitting the bottom line that's instead going to Wall Street and the investors backing these companies.

Eric Papp: It didn't used to be like this, but now every major carrier owns its own PBM, so they're making profit at every level of the chain. If you're with one of the big three that control 80% of the market, there's a strong likelihood that your employees are overpaying — and you're overpaying as the employer as well.

At M.E. Wilson, our team has been ahead of this. We've been unbundling this for the past five years with our clients. Many of our clients are now with SmithRx. The contracts are typically one year with a 90-day out, so if clients want to leave, they won't lose money. If you're in a legacy PBM contract, there are a lot of handcuffs. There's a lot of money you'd have to forgo to get out, or you have to wait until the contract ends.

I've seen big companies locked into three-year contracts with complicated clauses and 100-page documents designed to confuse people. But really, people want savings and transparency, and we need to keep it simple.

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Nicole: What are the most important things HR leaders should understand about how pharmacy benefits are actually managed and paid for?

Eric Porter: Similar to what we've talked about, there's this idea that managing to a certain guarantee or managing a contract with your pharmacy is in your best interest. But if you take a step back and decouple it, working with a client-aligned PBM is extremely important today. That's a good step in the right direction for HR leaders to consider.

Eric Papp: One way to arm yourself is to look at your contract. Pull it out, and even if it's 80 or 100 pages, run it through an AI tool — something like Claude — and ask it to look for dangers: spread pricing, rebates, how they make their money. You're going to be astounded. In that contract, it might say, "We give 100% of rebates," and then the next line — maybe on the next page — says, "We define what a rebate is." Like, wait — what's going on here?

There are games being played, and that's where I usually have folks start — just to get educated. I also put together a 26-page BLUEPRINT for i&d that goes into more detail. I also cover the FTC ruling from February 2026, when they ruled against Express Scripts. More light is starting to shine on these practices, which is a great thing. Fiduciary responsibility is coming into focus, and the government is stepping in. More cases are now emerging because these contracts are erroneous and employers are paying far more than they should.

Nicole: Right. And they're kind of getting trapped, and they're not entirely sure why.

Eric Papp: Right.

Eric Porter: Yeah.

Nicole: Well, understanding your contract sounds like a great place to start. But it is overwhelming — the contracts can be incredibly complex.

Eric Porter: And that's why working with the right consultant matters, too. As HR professionals, there are a million other things on your plate that you have to worry about.

Eric Papp: And your consultant or broker — there should be no misaligned incentives. If a consultant is charging you more when you spend more, that means there's no incentive for them to drive your costs down. So make sure you're working with the right people to help you with that.

Nicole: That's a great way to probe when you're looking for a new benefits consultant. So how do you communicate pharmacy benefit changes in a way that builds trust rather than employee frustration? It is a sensitive topic.

Eric Porter: Everyone needs medication, and no one likes change — that's just human behavior. What we find at SmithRx is that when we do a proposal for our clients, it's usually about 3 to 5% of members who would face any sort of disruption in a PBM change. That 5% often drives 60 to 70% of your cost.

So if you have 100 people on the plan, we're talking about three to five people we'd need to be reaching out to — and obviously that scales. But that's the number one concern when someone makes a change. HR professionals tell us: "The savings sound great, but at what cost — people lining up outside my door, more tickets in my inbox, more things I now have to deal with?"

At SmithRx, we approach this with a very white-glove approach. We have member advocates and patient advocates who reach out directly to members on the plan. They're calling, emailing, and texting. They own the process from start to end if there's any behavior change that needs to happen. Communication has to happen throughout the process, but also early.

During implementation and open enrollment, we're extremely involved in ensuring people have the right steps in place. We also offer a grandfathering period when someone makes a change — we don't want to rip the Band-Aid off. We'll work with what the employer wants to do, but typically we allow 60 to 90 days to land the plane, ensure the right communication goes out, and make sure the right people are in place to ensure change happens effectively and empathetically.

There's a lot at stake, but during the evaluation phase, the number one concern is: "I could save a million or two million dollars here, but at what cost to my livelihood as an HR professional?"

Eric Papp: When you look at the levers an HR professional can pull to drive costs down, pharmacy — if you're self-insured — is one of the fastest ways to tackle that. And as he said, it's not like a massive disruption. It's not like switching to reference-based pricing where everything is upended. The disruption is very minimal.

We've implemented this across blue-collar and white-collar organizations alike, and we've seen success. We just had someone come up to us after our last session — a client at SmithRx in Utah — who said that within four months everything was settled, and within the year they saved a million dollars. And we didn't even know they were in the room.

The point is, you do have to put in some work, but it's like "choose your hard." You'll look like a hero. Many employees will actually get their medications for free through manufacturer programs, whereas before they were paying out of pocket. SmithRx handles that outreach. So now someone making $80,000 or $90,000 might qualify for free medication. Employees talk to each other, too — "Hey, pick up the phone when SmithRx calls." It's pretty cool.

Nicole: So we can't talk about pharmacy benefits without talking about GLP-1 medications. According to SHRM's 2026 Benefit Survey, 47% of organizations offer GLP-1 coverage for Type 2 diabetes management, and 15% offer it for weight management. How have GLP-1 medications changed the way employers think about pharmacy benefits and workforce health?

Eric Porter: Drastically. Utilization is just up and to the right — not just in GLP-1s, but in autoimmune and plenty of other categories. GLP-1s come up every day.

The benefit of having a self-funded plan is that you get to decide. The 47% for Type 2 diabetes — there are effective medications that exist, and we're seeing good results with GLP-1 coverage for those electing to do it. At SmithRx, we're always operating as a pass-through and transparent PBM, so we're getting those medications at the lowest net cost possible, passing back co-pay cards, and making sure rebates get passed through.

The strategies are there for the employer to decide what's best for them. We do offer coverage for both weight loss and Type 2 diabetes, but there's a strict prior authorization process in place. We're seeing about a 37% approval rate on our PAs, which means it's not as easy to obtain as it could be — and that's a good thing for the employer.

Eric Papp: That's what your consultant should be doing, because if this goes unwatched, it can blow up your plan. You have to put guardrails in place. And if you're not with a modern PBM like SmithRx, you're paying even more.

That's why you've got to keep a close eye on this with your consultant and broker — tracking utilization and the approval rate. Sometimes there are no guardrails in place, and things go unwatched. Then six months in or at end of year, you have to go explain it to the CFO or the board. Just some things to be mindful of. And GLP-3s are on the horizon as well — a lot is still continuing to unfold.

Eric Porter: We're also seeing it with other diagnoses — sleep apnea, obesity, and others. We work with employers to ensure medications are being dispensed in the right way. People often feel like GLP-1 coverage for weight loss is unsustainable, but there are partners and organizations that exist to help address that — lifestyle change programs and cardiometabolic providers that offer coaching and ensure people are taking the appropriate steps before they even get to the point of needing the medication. We've found those to be successful partnerships.

Nicole: So what are the most important questions HR leaders should be asking as they evaluate whether and how to cover GLP-1s?

Eric Porter: Doing an analysis is step one. GLP-1s are often the number one failed prescription when we look at claims for a prospective new client. First and foremost, you need to determine: Do you want to cover for weight loss, or do you want to cover just for Type 2 diabetes? Those are important distinctions because the direction could go one way or the other.

Start by having a strategy around that. Work with a consultant, your HR team, your CFO, or whoever it may be, to build a projection for which way to go. Also realize that these medications are not going away. GLP-3s are coming. Oral pill forms are emerging alongside injections. So ask yourself: Is this a benefit you want to offer employees? Is it a way to attract talent and enrich your benefit plan? Or is it going to break the bank?

Having a strategy and doing a bit of analysis will be extremely helpful. At SmithRx, we provide reporting and insights to help ensure employers are making the right decisions.

Eric Papp: You have to look at the numbers. Sit down and see what percentage of your working population is interested in this, and then what the cost would be.

Nicole: So it's not necessarily a one-size-fits-all solution for employers.

Eric Porter: It isn't.

Eric Papp: Yeah. Some organizations have ruled it out entirely, while others have fully embraced it. It really comes down to knowing what you want to offer.

Eric Porter: And looking at what's in the marketplace — there are some exciting things happening with partners that offer not only a low list cost for obtaining the medication, but also lifestyle change components with a strict prior authorization process. Promoting behavioral change is how you achieve sustainable cost as a long-term outcome.

Eric Papp: When people are sitting at home watching this and they see "$39," just know that might be for one month, and then it goes to $250 a month or more. And I've heard stories of people who lost 20 pounds but gained it all back the minute they stopped taking the medication. So the long-term effectiveness is still a question worth examining.

Nicole: HR is often stuck trying to balance two tough priorities — keeping costs under control while creating a positive employee experience and, as you mentioned, potentially attracting talent. Why is that balance particularly challenging when it comes to pharmacy benefits?

Eric Porter: Utilization is up, indications are continuing to rise for high-cost specialty medications, and new drugs are always coming to market. Balancing the employee experience with cost control is extremely important.

And ultimately, with a self-funded plan, you can make those choices — you can decide what you want to offer employees and when it makes sense to make an exception. It always seems to be the CEO or the president who wants an exception to stay on certain medications, and you have to weigh: is that worth it for the employee experience or not?

What we try to do at SmithRx is always look at drugs and obtain prescriptions at the lowest net cost possible, and pair that with a stellar member experience. That means educating both the end-user employee and the employer, and ensuring good communication all the way down the line, along with a firm understanding of what the cost is actually going to be.

With legacy PBMs, you often get stuck in a contract where the data is convoluted and confusing — you honestly don't know what's happening on the plan. We take a different approach. We look at expected total cost in a per-member, per-month metric. It's simple: take the total cost, divide by members on the plan, divide by 12 months. Per member per month — that's what you should be measuring pharmacy on.

Too often, things get complex with rebates, guarantees, WAC, AWP, and all these acronyms that supposedly tell you how to obtain prescription drugs at lower cost, when really the question is just: What did I spend?

Eric Porter: Pairing a clear cost picture with a stellar employee experience — ensuring employees are getting the right medications, backing the plan, and setting it up the way the employer wants — creates a good balance. We have close to 5,500 groups at SmithRx, and I think we've nailed it. We'll make tweaks along the way, but it's a good challenge to be looking at.

Eric Papp: As an HR professional, you can ask your broker or consultant to run an analysis. Ask them: Where do we stand right now? And then ask them to run a comparison against a modern PBM — like SmithRx, Capital Rx, or others — to see the potential savings and scope of what's possible.

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Nicole: One thing we're seeing in our research is that employers are becoming increasingly more selective about what they cover. In SHRM's 2026 Benefit Survey, there was a significant 10% drop in contraceptive coverage, with 66% of employers offering plans that cover it. Are you seeing organizations become more selective about what they cover, and how should HR leaders think through those trade-offs?

Eric Porter: I think the trend has been similar. The 10% drop is an interesting angle to look at, but really where the magnifying glass should be focused is on specialty drugs and the costs on that side of things. If you can contain specialty spending, you're more likely to consider covering GLP-1s for weight loss, contraceptives, or other alternative medications you wouldn't necessarily have considered before.

If you have a good balance on specialty cost and you're focused on lowest net cost, you may be more inclined to pursue those alternative benefits versus continuing to pay for high-cost specialty drugs while also trying to cover electives.

At SmithRx, we have a recommended formulary and recommended biosimilars as alternatives to high-cost specialty drugs. Think of them as generics of sorts — alternatives to some of these high-cost medications. You mentioned Humira; Stelara is another. Biosimilars are coming to market and will yield tremendous savings for the plan.

If that type of specialty cost containment is in place, it opens up a lot of options. Maybe it even opens up opportunities outside of benefits entirely — if you save one, two, or $3 million for the plan, what does that unlock for other departments or elective benefits you've been considering? People are being more selective, but if you can nail cost containment and unlock that money for the business, it opens a lot of doors.

Eric Papp: The main point, as he said earlier, is that about 3% of your population is often driving 60 to 70% of all your costs. Really dial in on that. I've done this for prospective clients — just give me your top 25 drug list by cost, and let's run those numbers and take a look. That's a pretty light lift. You should be able to get that data quickly if you're self-insured.

Fully insured is a whole other story — it's essentially a black box and you don't get much visibility. That's why most of our clients have moved to the self-insured or captive space, where they can get better control and better insight into what's actually going on.

Nicole: So as employers look for ways to control costs without reducing access to care, many are exploring biosimilars, as both of you have mentioned — FDA-approved medicines developed to be similar to the original product. However, not all biosimilars are created equal. How can HR professionals distinguish between a biosimilar strategy that truly delivers value and one that may not produce the savings they're actually expecting?

Eric Porter: Great question. To understand biosimilars, you really have to understand what happened in the market back in 2023. Humira is widely known as the most successful specialty drug of all time. Under patent, it generated over $200 billion in sales — an outrageous number — with a very high retail cost of over $100,000 for an annual prescription for that one drug alone. Just really unsustainable.

The drug came off patent in 2023, and a couple of interesting things happened. First, legacy PBMs knew this was coming. They knew they were making a lot off the drug because they were taking a large portion of the rebate. So legacy PBMs and large health groups — your Uniteds, your CVSs, your Cignas of the world — actually invested money into drug manufacturers, either their own or a partner, to make a biosimilar themselves. That way they could retain profit from the drug and retain control for those who were going to implement a biosimilar.

So you might think you're getting a good alternative, but it's still owned within the same vertical integration within those same organizations. They still have a preferred product and will push people in that direction.

The other thing that happened is that Humira's manufacturer knew the drug was coming off patent, so they actually doubled the rebate available from the drug. It was originally around $35,000. The rebate jumped to nearly $60,000 to incentivize PBMs to keep that drug on the plan — because the PBMs are going to take a bigger portion of that rebate.

Eric Papp: And it's like — where did that extra $30,000 come from? Like, "Here's an extra $30,000" — where was this money the whole time?

Let me just briefly explain it this way. Imagine you go into a grocery store — I'm from Tampa, so let's say Publix. You see milk on sale, 50% off. You think that's the best deal. The milk is $14, now it's $7. But then you walk over and see this other milk for $5 — same thing. No rebates, no discounts, just $5. That's a much better deal.

That's what happens with these biosimilars. The games they play mean HR professionals and CFOs don't know what they're really getting. They just think, "OK, whatever's on our plan is fine." That's why I'm a big believer in education. When HR professionals and CFOs can really get their arms around this and get educated, we arm our clients with all the information so they can make the best decisions.

Eric Porter: We could go on and on, but biosimilars are not all created equal. If you're aligned with a PBM that's acting as a fiduciary — truly client aligned — they will find the medication at the lowest net cost possible. That's our mission at SmithRx.

Eric Papp: And that's a big part of what consulting means. We brought SmithRx in, and I hold them accountable. That's my job for that HR manager — making sure they're doing what they said they'd do and that we're still on the path of lowest net cost. The whole thing is being educated enough to know who you're working with and what their capabilities are. There's so much information out there now that you can and should know these things.

Nicole: There is a lot of information — and that's kind of the overwhelming piece of it. Having someone to help you sift through it and not get distracted by the idea of a rebate — your milk analogy is really a good one. Americans love feeling like they're getting a deal.

Eric Papp: It's psychological. My dad is 87 — he'll come home from Aldi with something, and my mom will say, "Where'd you get that?" He says, "Oh, it was on sale." And she says, "We don't even eat that." We're just conditioned as consumers to think, "Oh, it's on sale — I have to get it."

Nicole: It really is about knowing the actual prices and what the best deal is.

Eric Porter: Education is so important. The industry has been made complex on purpose for the last 30 years. They tell you it's too complex, it's too hard to change, you're going to face disruption. And sometimes when you do try to change something, they charge you fees on top of it — which gets infuriating.

Finding someone who is in your best interest, whether a consultant or a vendor, is the number one priority. Ask: What's in it for me, and what's in it for you? Then work together to ensure accountability and that things get processed the way they were promised. If they don't, that's a failure on the PBM's part. We don't have locked-in contracts, as Eric mentioned, and we do our best to hold each other accountable.

Eric Papp: And your consultant has to have the company's best interests at heart. I tell people: "I work for you, not the carrier." That's not always how it works out there.

My background was in leadership — I was an author and speaker, wrote a couple of books. When I got into this business, I started seeing some interesting things. Right now I'm working with a company worth about $2 billion. We've been educating the CFO, and he's finally seeing over a million dollars in potential savings after being told for years, "You're getting the best deal." It took several three-hour meetings just to walk him through the process, unpack everything, and show him what was really going on.

Getting educated sometimes means bringing in a fresh set of eyes. We've also come in as the broker on just the pharmacy component for clients whose existing broker focuses mainly on medical. It's a valuable entry point.

Eric Porter: It's a whole new world out there — and a whole new language sometimes. All those acronyms.

Nicole: You need a glossary just to keep up.

Eric Papp: Exactly. That's why I put together a whole reference guide explaining what everything means — AWP and all the rest.

Nicole: Absolutely. So HR leaders spend a lot of time looking at pharmacy costs, as we've just discussed. How should they think about pharmacy benefit ROI, and what metrics tell them they're actually getting value from their investments?

Eric Porter: The per-member, per-month metric is number one. Boil it down to what the total spend actually is. Don't get trapped by discounts, rebates, and guarantees — they look flashy on paper, but the reality is often very different.

Beyond that, work with your finance team to ensure you have a good plan design and a clear strategy for what you're putting in place. But if you were to boil it down, per member per month is the one. At SmithRx, we provide reporting that's updated in real time — you can pull it at any time, feed it into a data lake, do whatever you need with it. It includes our fee, the rebate numbers, and the cost containment, and it shows all of that transparently.

That kind of transparency doesn't exist in many arrangements today. It's like pulling teeth to get any sort of data from a carrier or large health group, and it shouldn't be that way. We are seeing some progress, but if you don't know those numbers, that's a huge red flag.

Eric Papp: As an HR professional, your company owns that data. Those 12 months of pharmacy claims belong to you. Don't let anyone tell you otherwise. I've run up against legacy PBMs that won't produce it, and I tell clients: go back and tell them that's your data. You own it.

Nicole: That's a good tip. So five years from now, what do you think today's organizations will look back on and say, "We should have been paying more attention to that," when it comes to pharmacy benefits?

Eric Porter: Well, I can tell you that right now — three years after Humira came off patent — there are still plans processing Humira willingly. Strategy is one thing, but execution is what it comes down to. I think execution on biosimilar strategies is huge.

Five years from now, I think people will also look back and realize GLP-1s were here a couple of years before they really started paying attention to them on their plans. Multiple iterations and new versions are coming down the line as well.

And lastly — being with someone who is truly client aligned and acting in your best interests as a fiduciary. People change consultants, change carriers, pass the buck around. But the real question is: Does this person have my best interests in mind? Looking back, you may not always be able to say that was the case. Working with someone who is honest, trustworthy, ethical, and doing things the right way matters more than ever today.

Nicole: Thank you, Eric and Eric, for sharing your insights with us. And thank you to our studio audience — give yourselves a big round of applause. We will see you next time.

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