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Pharmacy rebates rise, but employer drug costs keep climbing
Employers are set to enter 2027 renewals with pharmacy reaching 25% of total healthcare spending, while 2026 drug costs are projected to increase 12%.
Insurance Business reports that higher rebate guarantees from pharmacy benefit managers may not translate into lower costs for self-funded employers, as pharmacy utilization growth is outpacing PBM discounts. The outlet cites Paul Pruitt of SHARx, warning that the rebate-to-cost gap is becoming more difficult to ignore during renewal cycles, especially as GLP-1 and specialty drug use accelerates.
According to Insurance Business, pharmacy is projected to account for 25% of total healthcare spending as employers head into 2027 benefit renewals. It also points to a projected 12% rise in employer drug costs for 2026, running ahead of the overall healthcare trend.
Business Group on Health data cited by Insurance Business attributes the faster growth to GLP-1 expansion, more specialty drug indications, and the emergence of cell and gene therapies. The piece uses an example where a negotiated 10% unit price reduction does not offset volume increases, with total annual spend rising from $1.0 million to $1.26 million if utilization grows from 100 to 140 members.
The outlet frames the issue as volume overwhelming rebates, saying discounts reduce price but not the number of prescriptions or high-cost therapies driving total spend. It cautions that the rebate gap is widening in ways that could become harder for employers to manage by renewal time.