Employers are coming for your drugs... Should you worry?

By Joshua Bueller, Director of Strategic Planning, McCann Health Managed Markets

Recent evolution in the business of healthcare is forcing employers to become increasingly involved with managing overall healthcare and benefits for their organizations and their employees.

As the main fiduciary responsible for doing what is in the best interest of their employees, employers and their insurance benefit agents (eg, employer benefit consultants and employer coalitions) must ensure employees can maintain a positive health status and have access to care at a reasonable cost.

However, this has become more difficult than ever to achieve, and as a result, employers are increasing their levels of influence and control to better manage their healthcare benefit offerings.

Why the change now?

Increased medical cost: Over the past decade, benefit costs have increased an average of 4.4% per year, and medical costs are anticipated to increase an additional 7% in 2024.¹
Increased premium cost: In 2023, annual family premiums for employer coverage rose 7% to nearly $24,000.²
Expanded focus areas: Additional benefits include enriched family and caregiver benefits, increased access to sites of care and expanded offerings for behavioral health.^3,4
Legal considerations: Employees have started to take legal action against their employers, claiming offered benefits are more favorable to the employer, not the employee.⁵
Addressing health inequity: Example, the average value of benefits for women is more than $1.3 billion less than men.⁶
Manufacturer rebates: Pharmaceutical benefit managers (PBMs) have come under fire for not passing on the full amount of manufacturer rebates to plan sponsors (employers).⁷

Five ways employers are evolving their healthcare benefits

Employers are reimagining their management strategies to contain costs while also putting more focus on employee benefits.

1. Cost containment: The therapeutic categories of most concern now are diabetes, weight loss, inflammation, oncology, cardiology, mental health and women’s health. The increased scrutiny on these disease areas stems from their high expense as well as the potential for off-label use.⁸

Top strategies to control costs that are anticipated to have the most impact in 2025 (n=160)⁹:

27%: Utilization control initiatives (Prior authorization, case management, disease management, nurse advice lines)
21%: Cost-sharing initiatives* (Deductibles, coinsurance, copays, premium contributions)
15%: Plan design initiatives (Dependent eligibility audits, high-deductible health plans, spousal surcharges/carve-outs, formulary changes)
9%: Purchasing/provider initiatives (Telemedicine, centers of excellence, healthcare navigators/advocates, coalitions, quality initiatives)
7%: Administration/data analysis initiatives (Claims audits, utilization review, predictive modeling, AI)
6%: Work and wellness programs
8%: None of the above
7%: Not sure

*While cost is important, employers continue to face a competitive labor market and most leaders are avoiding “healthcare cost shifting,” or giving plan members more responsibility for the cost of health services through higher deductibles or copays.

2. Greater frequency in formulary reviews: With greater access to cost and utilization data and higher sensitivity to unexpected costs, some employers are starting to review and make changes to formularies more frequently (up to quarterly).

3. Expanded benefits: Some non-cost–related priorities to improve attraction and retention of top talent include¹⁰:

Expanding behavioral healthcare access and support for women’s reproductive health
Addressing health inequities
Adding family and caregiver support resources
Increasing the use of virtual care

4. PBM and retail pharmacy network changes: As the primary payer of commercial healthcare in the US, employers are re-evaluating their relationship with PBMs and the retail pharmacies in their network to maximize financial benefits (eg, manufacturer rebates) for their organizations and their beneficiaries.

5. Disease management: Employers are also bolstering their chronic disease management programs. These programs generally involve a structured treatment plan and support for disease management activities.

Looking to the future

Employers are challenged to find the right balance between offering healthcare benefits of value and not going bankrupt in the process. The struggle to pay for healthcare is even more pronounced with smaller employers who may not have the cash, negotiating power, or sophistication to optimize their benefits.

Manufacturers must recognize the pressure employers now feel is causing them to resort to blunt and potentially harmful cost-control measures (eg, alternative funding models) that could result in products being heavily managed or not included on their formularies or medical policies at all.

To navigate this new normal for employers, manufacturers should strive to understand how their products may affect the employer’s bottom line and also convey how products are medically necessary and will provide value to both the employers and employees.

Considerations for manufacturers

Deepen engagement with employers and their agents: A personal relationship goes a long way. Manufacturers should engage employers in the same way they engage health plans and PBMs. In addition, employee benefit managers and employer coalitions are important stakeholders as proxies for employers.
Ensure communications are aligned with value drivers: While employers are generally interested in some of the same topics as in the past (eg, efficacy, safety, financial value, health equity and disease management support), employers will be most receptive to value stories that align with their specific beneficiary makeup and economics.
Understand the connections between employers, health plans and PBMs: Employers direct the drug policies of commercial health plans and PBMs. Understanding how employers are aligned to their customers will help manufacturers with account planning and stakeholder influence mapping.

Turn to McCann Health Managed Markets for help with optimizing your employer engagements.

References

¹ The multiemployer health plan landscape: a ten-year look (2009-2018)

² Benchmark survey: annual family premiums for employer coverage rise 7% to nearly $24,000 in 2023

³ How to keep health benefits packages competitive

⁴Health benefit cost rose 3.2% in 2022, but employers see bigger increases ahead

⁵Deloitte analysis: employed women have as much as $15.4 billion more in out-of-pocket medical expenses a year than men

⁶J&J faces class action over employees’ prescription drug costs

⁷ Surprising data on employer-PBM rebate pass-through arrangements in 2023

⁸ Data on file. April 2024 interview with Jan Berger.

⁹ Health care costs pulse survey: 2025 cost trend

¹⁰ 3 ways that large employers influence health insurance costs, coverage