By Lad Williamson, Vice President of Business Development at Navion
Every year, the same meeting happens. The renewal comes in higher than expected. Someone walks through the options — stay fully insured, consider level funding, explore a captive, go self-funded. There are spreadsheets, exhibits, plan design changes, and the same underlying fear: What if we move and something goes wrong?
It’s a legitimate conversation. But while everyone is focused on the funding decision, one of the biggest cost drivers on the plan is often sitting in the background, largely unmanaged: Pharmacy.
Far too often, pharmacy has been treated as a line item inside a fully insured premium, something that comes with the carrier arrangement and gets reviewed once a year at renewal. That was never a good idea—today it’s a liability. Specialty medications, GLP-1s, rebate structures, contract language, biosimilar conversion opportunities and sourcing strategies can materially change what a group pays. Yet most employers are still making major funding decisions without truly understanding their pharmacy spend.
What they can’t see, they can’t manage.
Fully Insured: Simple Doesn’t Mean Managed
Fully insured has a real appeal. Fixed premium. Predictable costs. The carrier holds the risk. For groups with difficult underwriting dynamics, high-risk industries, older populations, certain demographics that stop-loss carriers won’t touch, it may genuinely be the right answer. But that simplicity comes at a cost.
In 2024, pharmacy made up nearly a quarter of all employer health care spend, up from 21% in 2021. The market projected an 11–12% increase in pharmacy costs heading into 2026, and according to the Business Group on Health, this can’t be remedied by plan design changes alone. For fully insured groups, that trend is essentially invisible until it shows up as a part of a renewal increase.
Inside a fully insured arrangement, pharmacy is bundled into the carrier’s financial model. The group sees a top drug list and typically a summary of total spend. What it doesn’t see is the full picture: which rebates are being retained, what contract terms are shaping costs, and what high-cost drugs are quietly driving trend. The employer only sees the renewal increase, not the mechanics behind it.
Staying fully insured doesn’t have to mean staying completely in the dark. Even without full claims data, total pharmacy spend, top drug lists and enrollment data can begin to tell a story. They won’t tell the whole story. But they can show whether there’s something worth investigating and start building the case for what comes next.
Self-Funded: When Pharmacy Finally Opens Up
The pharmacy conversation becomes real when groups move into a self-funded arrangement. That’s when the data becomes visible, and when the decisions become actionable.
For many employers, this is the first time they can see what was buried inside the premium. Rebate value they weren’t capturing. Specialty drugs that were never managed. GLP-1 utilization climbing faster than expected.
When rebates become visible, they’re usually the first thing employers want to talk about, and understandably so. The numbers can be significant. But chasing the biggest rebate isn’t the same as finding the lowest net cost, and conflating the two can sometimes be a costly mistake in pharmacy management. For many high-cost specialty drugs, when a member fills that drug through an alternate funding program, the plan pays a fraction of the original cost and the member may pay nothing out of pocket. That’s sometimes a better outcome than a rebate check arriving six months later. The bigger challenge for consultants and brokers is often trying to understand how to maximize the value of available alternate funding options and rebates simultaneously.
The right question isn’t “how do we get the biggest rebate?” It’s, “what’s the lowest net cost for this drug, for this member, under this plan?”
This is where having the right partner changes everything. Reviewing which programs apply to each unique group’s drug mix. Evaluating whether the PBM contract actually allows the group to use the strategies that make sense for their population. Some PBMs won’t let a group carve a specialty drug out and bring it back if things change. That’s a problem that could surface during or even after implementation, unless someone reviewed the contract beforehand.
The opacity problem runs deep enough that in February 2026, Congress passed the Consolidated Appropriations Act, the most comprehensive federal reform of PBMs in history, mandating 100% rebate pass-through, unlinking PBM compensation from drug prices and establishing new audit rights for plan sponsors, all taking effect in 2028. That it had to be written into federal law tells you everything about how the system worked before. Groups that start managing pharmacy now won’t be waiting for 2028 to find out what they’ve been missing.
The Layer Between the PBM and the Plan
Here’s something that often gets lost in the pharmacy conversation: a PBM isn’t a pharmacy strategy partner. PBMs administer benefits, process claims, manage formularies and support access to medications. That’s their job, and they do it for every group in their book, with their own contracts, economics and operational priorities.
Groups that get the most out of self-funding have someone in that gap, not replacing the PBM, but working alongside it. Someone who negotiated the contract with the plan’s interests in mind. Who can call the right person when a high-cost drug appears mid-year, when a rebate payment doesn’t match expectations, or when a member hits an access issue and HR is looking for answers.
The value isn’t just at implementation. It’s in the ongoing management, review of claims throughout the year, identification of drug sourcing alternatives, and holding the PBM accountable to contract terms and stepping in quickly when something needs to be fixed. PBMs aren’t often built to hold themselves accountable for what is negotiated with a group. But a CFO asking why pharmacy spend is climbing at month eight? They need someone who is.
The Question That Should Be Asked About Every Group
After one presentation on all of this—the data, the programs, the contract language, the opportunity—a broker in the room asked a simple question: Why wouldn’t you do this for every single group?
It’s the right question.
The advisors who make pharmacy part of the conversation aren’t just saving their clients money. They’re building better plans, lowering costs for the employees using them, and walking into every renewal with a story worth telling.
The advisors who don’t are leaving that story on the table. And their clients are paying for it.
Pharmacy doesn’t have to be the hidden conversation inside the renewal. With the right partner and the right strategy, it becomes one of the most powerful levers on the plan, and the place where the most meaningful savings are waiting to be found.
