What HR leaders need to know about the pharmacy cost crisis

The profits embedded in that spend are not flowing to care. They are captured by pharmacy benefit managers (PBMs), through spread pricing, rebates, and contract terms that most employers have never examined.

“There’s a reason why CVS purchased Aetna,” Okun said. “There’s a reason why the majority of the earnings on UnitedHealth Group’s calls are driven by Optum, not by UnitedHealthcare. Pharmacy is where the profits overwhelmingly lie.”

EPIC’s response was to integrate Pharmaceutical Strategies Group (PSG), an EPIC company and formerly one of the largest independent pharmacy consulting practices in the country, historically serving health plans, large insurers, and Fortune 100 companies, into its middle-market consulting platform, making clinical and contractual pharmacy expertise available to employer clients at a scale that was previously out of reach.

A well-managed pharmacy consulting relationship, according to Okun, can produce approximately a 30 percent reduction in pharmacy spend. At current pharmacy cost levels, that translates to a meaningful reduction in total plan costs. Without that expertise, “any major middle-market employer that doesn’t have an expert pharmacy consultant aligned to the relationship is almost certainly hemorrhaging 5 to 10 percent at a minimum out of their total healthcare spend,” he said.

What HR directors should be asking right now

Okun’s practical advice to plan sponsors starts with the contract. Request your PBM contract and read it carefully. The specific language around how average wholesale price (AWP) is defined, and what qualifies as single-source generics, can have significant financial consequences that are easy to miss without specialist support.