GLP-1 drugs like Wegovy and Zepbound have exploded in popularity for both weight loss and type 2 diabetes. They work, but they’re expensive, often exceeding $1,000 per member per month. Left unchecked, GLP-1 costs will crush your pharmacy spend and drive up health plan premiums, stop-loss rates, and employee contributions. Figure 1 models the budgetary impact of adding Zepbound to the formulary of a self-funded employer with 1224 members. Here’s how HR and Finance Leaders can take control of soaring GLP-1 drug costs.

1. Don’t Rely on PBMs to Manage the Problem

Many PBMs profit when your drug costs go up through spread pricing, rebate retention, and inflated dispensing fees. GLP-1s have become one of their biggest profit centers. If your PBM’s strategy to manage GLP-1s is vague or nonexistent, that is a problem.

Recommendation: Review your PBM contract. Make sure you have access to claims-level rebate data, no spreads, and full visibility into how GLP-1s are covered, reimbursed, and dispensed.

2. Establish Clear Clinical Criteria for Coverage

Approving GLP-1s for every employee who requests them is not financially sustainable. But denying coverage entirely can create backlash and retention issues.

Recommendation: Require prior authorization based on:

• Confirmed diagnosis of type 2 diabetes or BMI ≥30 (or ≥27 with comorbidities)
• Failure of first line therapy (i.e. Metformin) with diagnosis of type 2 diabetes
• Documented history of lifestyle intervention
• Quarterly clinical review to assess improvement (weight loss or A1C)
• Discontinuation if there is no measurable improvement after 6 months

3. Move GLP-1s to the Pharmacy Benefit

Many GLP-1s administered in a clinical setting are billed under the medical benefit, where visibility and control are limited. Rebate capture is also more difficult.

Recommendation: Shift GLP-1 claims from the medical to the pharmacy benefit when possible. This improves formulary control, rebate access, and member-level tracking.

4. Use Tiered Coverage and a Narrow Formulary

Covering every GLP-1 is a waste of dollars. Employers need to focus coverage on the most effective and cost-efficient options.

Recommendation: Work with a fiduciary PBM to build a narrow GLP-1 formulary. Cover one or two preferred options. Require step therapy or exclude others entirely.

5. Explore Alternative Procurement Channels

Some employers are saving thousands per script by sourcing GLP-1s from international mail-order providers.

Recommendation: Evaluate alternate sourcing strategies, especially for weight-loss-only use. Savings can range from 40 to 60 percent per fill.

6. Tie Coverage to Lifestyle Support Programs

Drugs alone won’t solve obesity. Employers should require members to participate in lifestyle or obesity coaching programs as part of their GLP-1 coverage.

Recommendation: Bundle GLP-1 coverage with a medication therapy management (MTM), digital or onsite wellness program. Require active participation for continued access.

Bottom Line

GLP-1s deliver clinical value, but they can quickly become a budget buster if left unmanaged. Self-funded employers cannot afford to be passive. With the right guardrails, procurement strategy, and clinical oversight, you can offer meaningful access while keeping spend in check. If you’re ready to tackle your GLP-1 costs head-on, let’s connect.

Elevate your expertise in pharmacy benefits management with the Certified Pharmacy Benefits Specialist® (CPBS) program, sponsored by the UNC-Chapel Hill Eshelman School of Pharmacy. Whether you’re an HR leader, finance executive, consultant, or pharmacist, this certification provides the in-depth knowledge and strategic insight needed to manage pharmacy benefits with confidence and cost efficiency. Gain up to twenty continuing education credits, enhance your career prospects, and help your organization take control of pharmacy spend. Register today to join a growing network of professionals shaping the future of pharmacy benefits management. Learn more at the Pharmacy Benefit Institute of America.

“If you don’t know how your PBM gets paid, you’re probably overpaying.” That’s not scare tactics, it’s a fiduciary truth. For CFOs, CHROs, benefits consultants, and self-funded employers, understanding how a pharmacy benefit manager (PBM) earns revenue is the difference between managing costs and subsidizing someone else’s margin.

PBM Profits Often Come From Plan Overspending

Most PBMs profit through spread pricing and other opaque tactics. They earn revenue from the gap between what your plan pays and what the pharmacy receives, along with a mix of back-end cash flows like rebates, DIR fees, and clawbacks. These streams are often subsidized by inefficient benefit design and weak clinical oversight. The issue? These profits are usually hidden, buried in complex financial models and disguised as standard industry practice.

Here’s how you should be modeling PBM earnings:

Earnings After Cash Disbursement Formula

EACD = AF + DF + IC + MR – CD

Where:

• MR = Manufacturer Revenue
• IC = Ingredient Cost Reimbursement
• DF = Dispensing Fees *(includes traditional dispensing fees and DIR fees)
• AF = Administrative Fees
• CD = Cash Disbursement to pharmacies and rebate payouts to plan sponsors

Note: In this formula, DF (Dispensing Fees) is a composite of:

• Dispensing Fees paid or retained
• DIR Fees (Direct and Indirect Remuneration) collected from pharmacies

DIR and DF Are Your Plan’s Money

When PBMs withhold or clawback fees from pharmacies (whether labeled as DIR, performance penalties, or admin charges) they’re using your plan’s volume and activity to generate income. If these funds aren’t transparently passed back or accounted for, they become undisclosed profit. In fiduciary terms, that’s plan leakage.

Why PBM Earnings Matter

If your PBM’s compensation is opaque, you’re at risk for:

• Overpaying for drugs, even when rates look competitive
• Losing plan assets to undisclosed spread, clawbacks, or retained fees
• Incentive misalignment that drives up utilization or keeps higher-cost drugs on formulary

In contrast, when a PBM provides clear, formula-based earnings disclosures, you can:

• Benchmark fees against fiduciary standards
• Demand rebate and DIR transparency
• Eliminate conflicts of interest

Fiduciary Oversight Starts with Financial Clarity

If your PBM resists disclosing their earnings using a formula like the one above, that’s a red flag. You can’t control what you can’t see, and in pharmacy benefits, visibility is leverage. Bottom line, you’re not just managing a benefit, you’re managing a financial asset. Know how your PBM earns their money, and you’ll protect more of yours.

Elevate your expertise in pharmacy benefits management with the Certified Pharmacy Benefits Specialist® (CPBS) program, sponsored by the UNC-Chapel Hill Eshelman School of Pharmacy. Whether you’re an HR leader, finance executive, consultant, or pharmacist, this certification provides the in-depth knowledge and strategic insight needed to manage pharmacy benefits with confidence and cost efficiency. Gain up to twenty continuing education credits, enhance your career prospects, and help your organization take control of pharmacy spend. Register today to join a growing network of professionals shaping the future of pharmacy benefits management. Learn more at the Pharmacy Benefit Institute of America.

Self-Funded Health Plans and Recent Challenges to State PBM Laws and other notes from around the interweb:

• Stuck in the Middle: Self-Funded Health Plans and Recent Challenges to State PBM Laws. In recent years, prescription drug prices have been top-of-mind for state legislators, who have responded by passing laws that seek to control that pricing in a variety of ways, including by regulating pharmacy benefit managers (PBMs). While states are permitted to regulate fully insured products offered in their state, including mandating the benefits that insurers must offer, the Employee Retirement Income Security Act of 1974, as amended (ERISA) preempts state laws that impermissibly relate to self-funded employer-sponsored health plans that are subject to ERISA.

• The Uneven Landscape of Prescription Coverage and Restrictions Across U.S. Insurance. Medicaid, often viewed as a safety net, covers the broadest share of prescribed drugs but imposes more restrictions than any other insurance type. Medicare, by contrast, covers the least drugs while restricting access for nearly half of the drugs that are covered. Commercial insurance, typically employer-sponsored or purchased individually, falls in the middle in terms of drug coverage but has the fewest coverage limitations, like prior authorization, quantity limits, and step therapy.

• Nonadherence Remains Common Concern in Dermatology. Concerns of low adherence for dermatological therapies persist, translating to poor patient outcomes, ineffective treatment, and decreased quality of life (QOL), according to a study published in Cureus.1 Researchers believe this low adherence can be owed to the sheer variety of treatment options available for a number of prominent dermatological conditions. According to the CDC, medication nonadherence is the act of a patient not taking their prescribed medicine or not following their providers’ instructions properly. While many factors can contribute to nonadherence, as well as barriers that impede patients’ ability to be adherent, it is known to result in uncontrolled blood pressure and greater rates of hospital admissions.

• Payers split on GLP-1 strategy. Insurers are employing different strategies to manage the high cost of GLP-1 drugs. Most GLP-1 drugs are approved to treat type 2 diabetes. Wegovy and Zepbound are approved for weight loss. The drugs often cost more than $1,000 a month. Multiple insurers have cited the high price of GLP-1 drugs as a contributing factor to financial losses in 2024. Some insurers have chosen to drop coverage of the drugs for weight loss altogether.

Why TransparentRx Is Your Trusted Partner for Smarter Pharmacy Benefits

At TransparentRx, we specialize in delivering fiduciary pharmacy benefit management services that prioritize transparency, cost containment, and optimal patient outcomes. Our unique approach helps self-funded employers, benefits consultants, and health plan sponsors navigate the complexities of pharmacy benefits while reducing costs and enhancing care.

If you’re ready to take control of your pharmacy benefit strategy and eliminate hidden fees, contact TransparentRx today for a consultation. Let us help you achieve smarter, more effective benefits management.

Pharmacy Benefit Managers (PBMs) were originally designed to help employers manage rising drug costs. Today, many have built business models that put profits ahead of patient care, creating pricing games, blocking independent pharmacies, and driving up plan costs.

Arkansas is putting a stop to that. HB 1150, a new law set to take effect in 2026, will prohibit PBMs that own pharmacies from operating them in the state. The goal is simple: eliminate conflicts of interest and protect patient access to affordable care.

Employers, especially those with Arkansas-based members, should prepare by:

• Choosing PBMs without ownership ties to licensed pharmacies in the state.
• Working with current PBMs to ensure pharmacy networks include non-affiliated providers.
• Planning for pharmacy closures, especially in areas where access may already be limited.

Because HB 1150 regulates pharmacy licensing, not benefit design, employers with self-funded ERISA plans likely won’t be exempt.

Other states and even Congress are watching Arkansas closely. Change is coming, and employers that demand a true fiduciary standard from their PBM partners will be better positioned to control costs and protect their members.

At TransparentRx, we help employers eliminate hidden conflicts and ensure pharmacy benefits are managed with complete transparency and care. If your PBM isn’t aligned with your best interests, let’s talk.

Executive Action Aims to Slash Drug Prices and Enhance PBM Clarity and other notes from around the interweb:

• Executive Action Aims to Slash Drug Prices and Enhance PBM Clarity. The Employer Retirement Income Security Act (ERISA) mandates strict standards for fiduciaries managing employee benefit plans, requiring careful selection, and monitoring of third-party providers like PBMs. Recently, the PBM industry faces increased scrutiny over drug costs, transparency issues, and lawsuits alleging mismanagement of prescription benefits. On April 15, 2025, President Donald Trump issued an executive order (EO) to reduce prescription drug prices in the U.S. This order instructs the Department of Labor (DOL) to enhance transparency in employer health plans regarding compensation from pharmacy benefit managers (PBM). While these changes will take time to implement, immediate cost reductions are not expected.

• The Rise in Direct-to-Consumer Advertising of Prescription Drugs. From the marketing of drugs with low-added benefit to manufacturers’ inability to follow FDA guidelines, direct-to-consumer advertising for prescription drugs has increased in the US and is beginning to raise alarms. “Under FDA guidelines, pharmaceutical companies are supposed to provide a balanced view of drugs in advertising in terms of their risks and benefits,” said Jenny Markell, BA, PhD Candidate of Health and Public Policy at the Johns Hopkins Bloomberg School of Public Health. “They’re supposed to avoid any misleading information. It’s illegal, for example, to overstate a drug’s benefits, misrepresent data from studies, or make claims that are not supported by adequate evidence.” However, even after FDA attempts of holding manufacturers accountable, drug companies continue to skew the country’s perceptions of specific prescription drugs.

• PBMs Score a Win in Federal Court Against State Regulation. A recent federal court decision has the potential to tip the balance in an ongoing series of skirmishes over state regulation of pharmacy benefit managers (PBMs). In McKee Foods Corp. v. BFP Inc. d/b/a/ Thrifty Med Plus Pharmacy, the US District Court for the Eastern District of Tennessee declared that an “any willing pharmacy” requirement in Tennessee was preempted by the federal Employee Retirement Income Security Act of 1974 (ERISA), as amended. On one side, self-funded group health plans argue that ERISA allows them to comply with a single set of rules nationwide, rather than having to navigate a patchwork of different, overlapping, and sometimes conflicting state laws.

• Arkansas governor signs legislation banning PBMs from simultaneously owning pharmacies. Arkansas lawmakers in the Senate on Wednesday passed a bill that would stop pharmacy benefit managers (PBMs) from owning pharmacies and selling drugs retail in the state. The bill now heads to the governor’s desk for her signature. PBMs are the middlemen who negotiate with insurance companies, manufacturers, and pharmacies to set drug prices. Where the controversy comes in is when PBMs also own their own pharmacies, creating what many believe is a conflict of interest. CVS officials said a new law restricting Pharmacy Benefit Managers from owning pharmacies will result in the closure of more than 20 Arkansas pharmacies.

Why TransparentRx Is Your Trusted Partner for Smarter Pharmacy Benefits

At TransparentRx, we specialize in delivering fiduciary pharmacy benefit management services that prioritize transparency, cost containment, and optimal patient outcomes. Our unique approach helps self-funded employers, benefits consultants, and health plan sponsors navigate the complexities of pharmacy benefits while reducing costs and enhancing care.

If you’re ready to take control of your pharmacy benefit strategy and eliminate hidden fees, contact TransparentRx today for a consultation. Let us help you achieve smarter, more effective benefits management.

Non-fiduciary PBMs negotiate with drugmakers and pharmacies to benefit themselves. They use the purchasing power of plan sponsors who lack full insight into pharmacy economics. What used to be a cost-efficiency business is now, in many cases, about promoting the most profitable products, not the most clinically appropriate ones. If you’re a smart buyer of PBM services, you want more control over your pharmacy benefit plan, not less. Here are six pillars of a high-performing pharmacy benefit plan design to help you build a plan that works in your favor.

1. Internal Expertise

Internal expertise means a buyer or consultant has the knowledge to independently evaluate PBM contracts, pricing, and performance without relying on the PBM for direction. It includes deep knowledge of formularies, rebate structures, MAC pricing, and plan design strategies, for instance. Before partnering with a PBM or consultant, it’s worth asking a few key questions as a team:

• Do we have the pharmacy benefits expertise we need in-house?
• If not, would targeted education or outside support add value?
• Are the consultants we’re relying on certified in pharmacy benefit management?

As a Benefits Director, you don’t need to be a pharmacist, but you do need a strong understanding of how pharmacy benefits impact your plan’s performance. Relying too heavily on a PBM or consultant without the right checks can expose your organization to unnecessary risk. That’s where Certified Pharmacy Benefits Specialists (CPBS) come in. Having credentialed support on your side gives you the clarity and leverage to keep your plan aligned with your goals, not someone else’s bottom line.

2. Access

The formulary is your plan’s rulebook for drug access. It informs which medications are covered, at what cost to members, and under what conditions, guiding both prescribers and patients toward clinically appropriate and cost-effective choices.

You should review formulary design regularly, especially for high-cost drug classes like GLP-1s used for weight loss. These drugs now exceed $1,000 per member per month. While effective, ICER has stated their prices are not justified by the long-term benefit in obesity treatment alone.

PBMs may promote these drugs heavily due to large rebates. That’s not fiduciary. Make decisions based on outcomes and cost-effectiveness, not marketing hype or rebate flow. When managed by a fiduciary PBM, the formulary is designed to serve the plan sponsor’s best interest, not the PBM’s bottom line.

3. Medication Adherence

Medication adherence refers to the extent to which a patient takes their medications as prescribed by their healthcare provider. This includes the correct dose, timing, frequency, and duration of use. Non-adherence drives over $290 billion in avoidable healthcare costs each year. Even the best-designed plan fails if members don’t take their medications.

Use Proportion of Days Covered (PDC) to track adherence. A PDC of 80 percent or higher signals a member is staying on therapy. Monitor this at the plan level and intervene where necessary. Otherwise, avoidable ER visits and hospitalizations will drive up your total spend.

4. Cost Containment

Cost containment in pharmacy benefits management refers to a range of strategies, policies, and practices used to manage and reduce the total spend on prescription drugs without compromising the quality of care or patient outcomes. It’s a foundational goal for any fiduciary PBM and a critical metric for evaluating pharmacy benefit performance. Common cost controls in pharmacy benefits management include:

• Mandatory generics
• Therapeutic substitution
• Quantity limits and step therapy
• Specialty pharmacy carve-outs

But controls without measurement are worthless. Use Total Cost of Care (TCOC) to see if lower pharmacy spend is driving higher medical costs. And track Per Member Per Month (PMPM) pharmacy trend to keep your budget on track. These are your two gold-standard benchmarks. If your PBM isn’t talking about them, ask why.

5. Member Cost Share

Cost-sharing strategies like copays and coinsurance are standard, but some tactics do more harm than good. Copay accumulator programs block manufacturer copay assistance from applying to members’ deductibles. That means patients pay more out of pocket, often unexpectedly.

PBMs pocket the assistance and bill your plan anyway. Members struggle to afford meds, adherence drops, and total costs go up. These programs benefit PBMs, not your plan or your people.

6. Outcomes and Safety

Your plan should limit or exclude drugs that provide little to no health benefit. This includes:

• Hair growth and weight loss products
• ED drugs
• Growth hormones
• Over-the-counter meds
• Opioids

The opioid crisis is a case study in misaligned incentives. From 2016 to 2017, Purdue Pharma paid $400 million in rebates and fees to the big three PBMs. Internal documents showed Purdue understood rebates were the key to staying on formulary. And it worked. Self-funded employers paid for it, both financially and in lost lives. Be explicit about what your plan won’t cover. Do not let your PBM make those decisions in a vacuum.

Final Word: Own Your Education

The best protection against misaligned incentives is knowledge. When you understand how pharmacy benefits really work, you’re in a stronger position to lead, question, and negotiate.

Too often, plan sponsors hand over control to PBMs or advisers without fully understanding the mechanics behind pricing, rebates, and utilization. That gap is where unnecessary costs and missed opportunities live.

Invest in your own education and that of your team. Learn the language. Get certified. Ask sharper questions. When you understand the system, you don’t just manage a benefit, you lead it. Transparency, accountability, and aligned incentives all start with being informed.

Governor signs legislation banning PBMs from simultaneously owning pharmacies and other notes from around the interweb:

• Arkansas governor signs legislation banning PBMs from simultaneously owning pharmacies. Arkansas lawmakers in the Senate on Wednesday passed a bill that would stop pharmacy benefit managers (PBMs) from owning pharmacies and selling drugs retail in the state. The bill now heads to the governor’s desk for her signature. PBMs are the middlemen who negotiate with insurance companies, manufacturers, and pharmacies to set drug prices. Where the controversy comes in is when PBMs also own their own pharmacies, creating what many believe is a conflict of interest. CVS officials said a new law restricting Pharmacy Benefit Managers from owning pharmacies will result in the closure of more than 20 Arkansas pharmacies.

• Overcoming Biosimilar Utilization Barriers. “The opportunities with all of these biosimilars are that they have the ability to improve patient access, new starts, persistence and adherence,” said panelist Alex Mersch, PharmD, an assistant director of ambulatory specialty programs at University of Iowa Health Care, in Iowa City. “For many organizations, especially if we look at it from the inpatient side, there’s a lot of opportunity to decrease drug costs by [replacing the reference product with] the biosimilar.”

• The Rise in Direct-to-Consumer Advertising of Prescription Drugs. From the marketing of drugs with low-added benefit to manufacturers’ inability to follow FDA guidelines, direct-to-consumer advertising for prescription drugs has increased in the US and is beginning to raise alarms. “Under FDA guidelines, pharmaceutical companies are supposed to provide a balanced view of drugs in advertising in terms of their risks and benefits,” said Jenny Markell, BA, PhD Candidate of Health and Public Policy at the Johns Hopkins Bloomberg School of Public Health. “They’re supposed to avoid any misleading information. It’s illegal, for example, to overstate a drug’s benefits, misrepresent data from studies, or make claims that are not supported by adequate evidence.” However, even after FDA attempts of holding manufacturers accountable, drug companies continue to skew the country’s perceptions of specific prescription drugs.

• ERISA Preemption: Impact on State PBM Laws. Pharmacy benefit managers (PBMs) play a role in the US healthcare system by negotiating drug prices and formulary placements on behalf of insurers and employer sponsored health plans. Recently, there have been concerns about certain PBM business practices, including drug pricing transparency and reimbursement rates. This has prompted numerous states to enact laws regulating PBMs. A key legal challenge to these state laws is whether ERISA preempts these laws. ERISA is a federal law that sets national standards for employer-sponsored health plans. One of its most important provisions is preemption, meaning that ERISA overrides state laws that attempt to regulate employer health plans directly.

Why TransparentRx Is Your Trusted Partner for Smarter Pharmacy Benefits

At TransparentRx, we specialize in delivering fiduciary pharmacy benefit management services that prioritize transparency, cost containment, and optimal patient outcomes. Our unique approach helps self-funded employers, benefits consultants, and health plan sponsors navigate the complexities of pharmacy benefits while reducing costs and enhancing care.

If you’re ready to take control of your pharmacy benefit strategy and eliminate hidden fees, contact TransparentRx today for a consultation. Let us help you achieve smarter, more effective benefits management.

Not all red flags in PBM contract clauses are obvious. Some are buried in plain sight, phrased to sound harmless, even routine. But make no mistake, these clauses are often where profit hides, and where plan sponsors lose control. Here are five such clauses that deserve your full attention.

1. “Brand Effective Rate” Guarantees

On the surface, a Brand Effective Rate (BER) seems like a safeguard—a guarantee you’ll get a certain discount off AWP for brand drugs. But here’s the trap: PBMs typically define “brand” based on their internal classification, not by FDA or Medispan standards. That means drugs commonly accepted as generics may be counted as brands in your pricing guarantees. This manipulation boosts the PBM’s spread revenue and inflates your actual drug spend—all while appearing to honor the BER.

Example clause: “PBM guarantees a Brand Effective Rate discount of 18% off AWP for brand drugs as determined by PBM’s internal classification system.”

Fix: Demand clarity. The contract should reference a third-party source like Medispan for how “brand” and “generic” drugs are defined, not leave it up to the PBM.

2. “Custom Rebate” or “Non-Standard Rebate” Language

Some contracts give PBMs the ability to retain rebates that fall outside the traditional formulary or performance structures. These might be labeled as “custom,” “specialty,” or “administrative” rebates. These aren’t small dollars. They’re just hidden from view.

Example clause: “PBM will remit 100% of formulary rebates. PBM retains administrative, data, and market share incentives associated with manufacturer contracts.”

Fix: Require full transparency and 100% pass-through on all rebates—no matter what label they carry. Avoid vague classifications.

3. “Market Check” Clauses Without Enforcement

A contract might include a market check clause, promising to benchmark pricing mid-contract. But if there’s no mechanism to enforce it—or worse, the PBM controls the data source—it’s window dressing.

Example clause: “PBM agrees to conduct a market check upon client request in the second contract year. PBM will assess market competitiveness and make adjustments where appropriate.”

Fix: Ensure market checks are tied to independently verifiable data sources and come with actionable pricing adjustments. If it’s not enforceable, it’s useless.

4. “Sole Discretion” Language for Formulary or MAC Lists

Clauses that give the PBM “sole discretion” to update the formulary or MAC pricing are dangerous. It gives them unilateral control over which drugs are covered and at what price—without accountability.

Example clause: “PBM may, at its sole discretion and without prior approval, modify the formulary or MAC pricing schedule to reflect current market conditions.”

Fix: Retain audit rights and require notification and approval for key formulary or MAC list changes. At a minimum, add a right to exit if the PBM acts against your financial interests.

5. “Audits Must Be Conducted by a Qualified Third Party”

This one sounds reasonable—until you try to conduct an audit. PBMs often define “qualified” in a way that disqualifies anyone who might dig too deep or ask the right questions.

Example clause: “Client may audit PBM once per contract year using a nationally recognized auditor approved by PBM.”

Fix: Retain the right to use an auditor of your choice, as long as they meet reasonable privacy and security standards. Don’t give the fox a say in which watchdog gets hired.

PBMs are skilled at writing contracts that preserve their margin while appearing compliant. That’s why it’s not enough to just review your contract—you have to decode it.

At TransparentRx, we operate under a fiduciary standard of care. That means no hidden clauses, no retained rebates, and no conflicts of interest. If you want a second set of eyes on your PBM agreement—or you’re tired of feeling like you’re being out-negotiated—let’s talk.

The Rise in Direct-to-Consumer Advertising of Prescription Drugs and other notes from around the interweb:

• The Rise in Direct-to-Consumer Advertising of Prescription Drugs. From the marketing of drugs with low-added benefit to manufacturers’ inability to follow FDA guidelines, direct-to-consumer advertising for prescription drugs has increased in the US and is beginning to raise alarms. “Under FDA guidelines, pharmaceutical companies are supposed to provide a balanced view of drugs in advertising in terms of their risks and benefits,” said Jenny Markell, BA, PhD Candidate of Health and Public Policy at the Johns Hopkins Bloomberg School of Public Health. “They’re supposed to avoid any misleading information. It’s illegal, for example, to overstate a drug’s benefits, misrepresent data from studies, or make claims that are not supported by adequate evidence.” However, even after FDA attempts of holding manufacturers accountable, drug companies continue to skew the country’s perceptions of specific prescription drugs.

• When middlemen own it all, patients pay the price. There’s mounting evidence that vertical integration drives up costs for patients and the government. A recent WSJ investigation showed PBMs are marking up the price of some specialty generic drugs dispensed at their specialty pharmacies by thousands of dollars. According to the FTC, pharmacies affiliated with the three largest PBMs made $1.6 billion on only two cancer drugs over the course of three years. Further, despite insurers and PBMs receiving significant rebates and discounts, often 50% or more, patients rarely benefit directly from these savings, according to the Congressional Budget Office’s Director of Health Analysis.

• Overcoming Biosimilar Utilization Barriers. “The opportunities with all of these biosimilars are that they have the ability to improve patient access, new starts, persistence and adherence,” said panelist Alex Mersch, PharmD, an assistant director of ambulatory specialty programs at University of Iowa Health Care, in Iowa City. “For many organizations, especially if we look at it from the inpatient side, there’s a lot of opportunity to decrease drug costs by [replacing the reference product with] the biosimilar.”

• Five ways to improve PBM procurement for clients. Nearly a decade ago, plan sponsors’ pharmacy benefit conversations focused mostly on member satisfaction and plan compliance. Today, fiduciary duty comes first, then member satisfaction, compliance and, of course, GLP-1s, which is why employers are counting on their benefit advisers more than ever to guide them through Rx matters. Times have changed, which begs the question, “What does it take to ensure plan sponsors meet their fiduciary duty?” Putting the pharmacy benefits manager (PBM) business “out to bid” every few years isn’t enough. Given heightened scrutiny of traditional PBMs and rising Employee Retirement Income Security Act (ERISA) liability risk, plan sponsors should regularly evaluate their PBM options, prioritizing strategies that lower total costs, improve member outcomes and safeguard long-term plan sustainability. However, issuing, evaluating, and managing requests for proposals (RFPs) from PBMs can be challenging.

Why TransparentRx Is Your Trusted Partner for Smarter Pharmacy Benefits

At TransparentRx, we specialize in delivering fiduciary pharmacy benefit management services that prioritize transparency, cost containment, and optimal patient outcomes. Our unique approach helps self-funded employers, benefits consultants, and health plan sponsors navigate the complexities of pharmacy benefits while reducing costs and enhancing care.

If you’re ready to take control of your pharmacy benefit strategy and eliminate hidden fees, contact TransparentRx today for a consultation. Let us help you achieve smarter, more effective benefits management.

In pharmacy benefits, PBM “lesser of logic” determines how much the plan pays for a drug. On paper, it’s designed to protect the payer by ensuring the plan always pays the lowest price among a set of benchmark options. But PBMs often game the logic by controlling which benchmarks are included in the first place.

What Is “Lesser of Logic”?

It’s a pricing rule that compares multiple benchmarks for a drug claim and uses the lowest one to calculate plan cost. Typically, these benchmarks include:

The logic should apply to all of these and select the lowest price for the third-party payer. But here’s where the manipulation starts.

Plan pays: $75 (MAC Price)
Rationale: It’s the lowest of all benchmarks.

Same drug, same benchmarks, but the PBM contract excludes U&C pricing from the “lesser of” calculation.

Plan pays: $75 (ingredient cost only)
Plan Should have paid: $50
PBM pockets: $25 spread (assuming no dispensing fee spread 🙄)
Problem: U&C was excluded, despite being the lowest actual price.

Caveat Emptor: Copayments Must Be Part of “Lesser of” Logic

The member’s copayment isn’t just a flat fee. It’s supposed to be the maximum they pay. If the ingredient cost is less than the copay, the member should pay the lesser amount. But PBMs often skip this check, allowing the member to overpay while the plan pays nothing. The technical term for this process is called a clawback.

Example:

• Ingredient Cost: $8
• Member Copay: $10
• Proper Charge to Member: $8
• Charge to Plan: $0
• Total Paid: $8
• Overpayment if Copay Isn’t Adjusted: $2
• Who Keeps the $2? PBM or pharmacy, depending on contract setup

This is a quiet but common form of margin capture. It punishes members and undermines trust in the plan.

Fix: Require in your contract that member cost share be the lesser of:

1. Flat copay
2. Coinsurance amount
3. Total claim cost (ingredient + fee)

That one line can stop millions in overpayments across large populations.

How PBMs Justify the Exclusion

They may say U&C data is unreliable or inconsistent. In other cases, they quietly stop collecting or enforcing U&C pricing, allowing it to fade out of relevance.

Why This Matters

Over thousands of claims, this tactic inflates your drug spend without raising red flags. You’re led to believe you’re paying the lowest price, but you’re often not.

What You Can Do About It

• Review your PBM contract. All four benchmarks, AWP – %, MAC, U&C, and copayment must be included in the lesser of logic.
• Request sample claims data. Spot-check random NDCs across pharmacies. Look for cases where U&C is lower than what was paid.
• Demand transparency. Know how often MAC lists are updated and whether U&C is captured and audited.
• Work with a fiduciary PBM. One that passes through all discounts and aligns its compensation with your best interest.

Final Thought

Lesser of logic only works if it includes every relevant benchmark. If your PBM gets to pick and choose, they’re not protecting you, they’re protecting their margin. Learn about lesser of logic and more at the Pharmacy Benefit Institute of America (PBIA) Summit.