It’s a question every health plan sponsor should be asking: Why are employees often paying more for their medications than anyone else in the system?
According to a 2024 Harvard analysis, it’s not just unfair—it’s potentially harmful. When employees are asked to pay more, they often stop taking the medications they need to stay alive.
Who Gets Paid on a $100 Drug?
The journey from drug manufacturer to patient involves a dizzying number of players—each taking their cut:
Manufacturers set the list price.
Wholesalers distribute.
PBMs negotiate prices and rebates.
Pharmacies dispense.
Insurers and Employers design benefit plans.
But guess who often pays the most at the end of that chain? The patient.
Why Patient Pay the Most
Even though PBMs negotiate rebates and discounts, employees often:
Pay based on the full list price (not the discounted one).
Face high deductibles before their plan kicks in.
Don’t benefit from the rebates PBMs and employers receive.
Example from PhRMA’s 2025 Report
The Pharmaceutical Research and Manufacturers of America (PhRMA) recently published an informative infographic demonstrating the money flows for brand medications.
Patient Pays More Than Every Other Stakeholder
In this example, a patient who hasn’t met their deductible needs a drug with a $100 list price:
Manufacturer keeps $62.00
Wholesaler keeps $0.50
PBM keeps $10.65
Pharmacy keeps $4.85
Plan sponsor keeps $23.10
Patient pays $101.10
The result? The patient pays higher than list price while others pocket fees and discounts. ‼️
Cost Sharing Isn’t Just Unfair. It’s Deadly.
Many plan sponsors like getting rebate checks. For some, rebates are treated as a sign of a good contract. The problem is patient cost sharing isn’t just a price and rebate issue. It’s a serious health problem.
Harvard’s Quarterly Journal of Economics studied the consequences of patient behavior changes in response to drug cost sharing:
First, patients stop taking drugs that are both high value and suspected to cause life-threatening withdrawal syndromes when stopped.
Contrary to the predictions of standard economic models, high-risk patients (e.g., those most likely to have a heart attack) cut back more than low-risk patients on exactly those drugs that would benefit them the most (e.g., statins). Patients appear unaware of these risks.
We conclude that far from curbing waste, cost sharing is itself highly inefficient, resulting in missed opportunities to buy health at very low cost.
That means the patients who need these medications the most—those at risk of heart attacks, strokes, or complications from chronic conditions—are the first to stop taking them.
There’s a belief (myth) higher copays always lead to smarter utilization. But that logic breaks down when it comes to prescription drugs. Drugs require a prescription. They are already controlled. They often prevent catastrophic health events.
The bottom line: Rx cost sharing kills. Even when the outcome isn’t death, the cost sharing meant to reduce “waste” can end up increasing ER visits, hospitalizations, and long-term costs.
What Should Employers Do?
If your company offers prescription drug benefits, you can design smarter benefits. Here’s how:
✅ Actionable Strategies:
Work with a transparent, pass-through PBM.
Any PBM can call themselves transparent. But when you pick one who really is the results are worth the effort. Favorable contract terms. No rebate hoarding. No spread pricing. No surprises.
Pass rebates through to the point of sale.
If you’re using rebates to lower premiums—great. But employees who take medications should see the savings at the pharmacy too.
Don’t inflate drug prices to increase rebates.
PBMs often prioritize more expensive drugs to increase rebates. Use evidence-based formularies for high efficacy, lower cost drugs.
Design for adherence, not deterrence.
A $0 copay for chronic conditions saves lives and money downstream.
Monitor the data.
Trust but verify. Make sure the PBM is acting and billing in accordance with the contract. Keep an eye on prescription fill rates to ensure adherence is high and employees are getting the medications they need.
Conclusion
When employees aren’t benefiting from negotiated discounts, something is broken. When copays and coinsurance cause patients to skip essential meds, something is dangerous. When plan sponsors don’t know it’s happening—or look the other way—something is out of compliance.
As a fiduciary, you’re not just managing costs—you’re responsible for protecting the people the plan serves.
Let’s talk about how your data—and your contracts—can help you fulfill your fiduciary duty while delivering better outcomes.
Don’t be a bystander. Change the status quo and reap the benefits of The Health Plan Compliance Advantage.
