Prescription Drugs: The Most Controllable Employer Healthcare Expense

Here’s the paradox: while pharmacy costs are rising quickly, they are also one of the most transparent, auditable, and adjustable parts of healthcare spend. With the right understanding and tools, employers can turn pharmacy benefits from a volatile cost center into a controllable strategic asset.

A big cost concentrated in a small population

Prescription drugs represent roughly 25–27% of employer health-plan spending, but that spend is highly concentrated. Specialty medications make up less than 2% of prescriptions while driving over 60% of total pharmacy costs.

That concentration matters. When a small number of prescription medications and claimants account for the majority of the spend, targeted interventions can produce disproportionate savings.

Predictable unit pricing

Unlike hospital or medical claims, pharmacy reimbursement is governed by contractual formulas. A common structure reimburses pharmacies based on Average Wholesale Price (AWP) minus a negotiated discount, plus a fixed dispensing fee.

Because ingredient costs and fees are contractually defined, employers can forecast, audit, and validate pharmacy spend in a way that simply isn’t possible with open-ended medical billing.

Negotiated rebates and discounts

Pharmacy benefit managers (PBMs) use scale to negotiate rebates and pharmacy discounts. Government reporting shows these negotiations offset roughly 20% of Medicare Part D spending, and industry analysts estimate over $145 billion in annual net savings for plan sponsors.

The key distinction is who keeps those savings. Employers that require transparency and pass-through arrangements can retain far more value than those in opaque, rebate-driven models.

The Levers Employers Can Pull

Reduce fraud and waste: Targeted interventions like high-cost claim reviews, partial fills for specialty drugs, and focused fraud detection can be deployed mid-year and deliver immediate financial impact, without redesigning the entire plan.

Visibility and Flexibility Through Self-Funding and Carve-Outs: Fully insured plans often bundle pharmacy costs into opaque premiums. Self-funded employers, especially those who carve out pharmacy benefits, gain:

• Full visibility into claims

• Direct negotiating leverage

• Flexibility to adjust formulary and contracting strategies independently

Carve-outs allow pharmacy benefits to be managed on their own merits rather than buried inside a medical contract, making pharmacy spend far more controllable.

Specialty Drugs, the Most Critical 2%: A tiny fraction of prescriptions drives the majority of pharmacy costs. Specialty and biologic drugs often cost tens of thousands of dollars per course, and a handful of claimants can dramatically distort an employer’s budget.

Effective strategies include:

• Early identification of high-cost claimants

• Ensuring prescription medication delivers the most cost-effective benefit

• Coordinating patient assistance and copay support

• Preventing misclassification that leads to massive overpayment

Managing these few claims well can change the entire cost trajectory of a plan.

How Aphora Health Helps Employers Regain Control

Aphora Health was built to address the exact challenges outlined above.

Dramatically reduced specialty medication costs with $0 member copay: Employers see material reductions in specialty spend without cost-shifting to members or compromising care.

Designed for self-insured and carve-out plans: Aphora integrates seamlessly with existing PBMs or carve-out arrangements. There’s no forced network disruption, no mid-year vendor upheaval, and no startup costs.

Generics built directly into the benefit: High-quality generics are embedded into the plan design with $0 copays, aligning financial incentives with clinical best practice.

High-touch care navigation: Each member receives a dedicated care navigator who coordinates with prescribers and HR teams, improving adherence and reducing downstream medical costs.

Real-time, audit-ready reporting: Employers receive claim-level visibility and fiduciary-grade reporting in real time. You always know where your pharmacy dollars are going.

True $0 copays, no friction: Eliminating copays removes barriers to adherence, improves outcomes, and creates predictable budgeting for employers.

Prescription drugs will remain a major driver of employer healthcare costs. But unlike many areas of healthcare, pharmacy spend is measurable, negotiable, and highly influenceable. With predictable pricing, generics optimization, targeted specialty management, and transparent self-funded structures, prescription drugs become the most controllable employer healthcare expense.

Paired with innovative partners like Aphora Health, pharmacy benefits stop being a mystery and start becoming a strategy.

If you're a self-insured employer or a broker looking to save money through pharmaceutical cost containment, visit us at the following link to learn more: https://aphorahealth.com/contact-us