6 Reasons Employer Pharmacy Costs Keep Climbing
To hear the full conversation, watch the webinar.
Unfortunately, pharmacy is the part of the health plan budget employers can predict least. According to recent data, it now accounts for nearly 25% of total healthcare spend and is growing at almost twice the rate of general medical trend. Most plan sponsors I talk to say managing it feels more like running a financial supply chain than offering a health benefit.
On our recent webinar, I sat down with Joe Huston, Garner's Vice President of Data, to dig into what our claims data says about where that growth is coming from. The common misconception is that Americans must be getting sicker, but the data shows something else. Prices, incentives, and where drugs get administered explain far more of the increase. And each one is something an employer can plan around.
1. Americans are not getting sicker
When we adjust for the aging of the population, we do not see a significant increase in the prevalence of chronic conditions like cancer and diabetes over time. So the rise in spending is not coming from a decline in the health of the average patient, and something else has to be pushing costs up. Our report on what's driving the healthcare cost crisis found four drivers across the whole plan, with pharmacy costs sitting firmly as one of the primary causes.
2. Patients are filling more prescriptions at every price point
Joe started his analysis with the basic question of how many prescriptions the average patient fills. Count prescriptions per patient over the last few years, and the number climbs about 9% a year. In fact, in 2025, just under 2.5 prescriptions per patient were filled.
So, is that growth coming from cheap drugs or expensive ones? Both. "We see increases in utilization basically across the full spectrum of price," Huston says. Eliquis, a branded blood thinner, shows a significant jump, and so does the generic statin. Each prescription also costs more than it used to, with the price per prescription growing about 5.6% a year.
3. Biologics are only 5% of prescriptions, but most of the spend
By volume, the vast majority of prescriptions are generics. By dollars, however, that order flips. "The majority of the spend are these biologics, despite representing only 5% of the volume," Huston says. Of the six drugs that account for the most spending in our data, four are biologics. The other two, the GLP-1s Ozempic and Mounjaro, are not technically biologics but behave like them in both their starting price and their protection from competition. Humira, the most expensive drug on the market, already has biosimilar competitors and still dominates them.
4. Biosimilars are not arriving the way generics did
The system we rely on to bring drug prices down hinges on patent expiration. When a branded small-molecule drug loses protection, exact copies show up, and three-quarters of the market moves to generics within a year, reaching almost 90% by year three.
Biologics are supposed to follow the same path through biosimilars, but "the shift towards biosimilars from biologics is a lot more muted and a lot slower," Huston says. The incentives explain why. PBMs collect substantial rebates from biologic manufacturers to keep the originals on formulary, and most states require a doctor's approval before a pharmacist can swap in a biosimilar, the opposite of the automatic substitution generics get.
Manufacturers also spend to hold onto patients directly. Joe showed a text from his pharmacy after he was prescribed a migraine biologic that runs about $1,000 a month. "I promise this is not staged," Huston says. The pharmacy offered to skip prior authorization and apply a manufacturer coupon that brought his cost that month to $0. "It's worth it for, in this case, Eli Lilly, to make this upfront investment," Huston says, because the payoff is a patient on a thousand-dollar drug. So most biologics with expiring patents do not even have a biosimilar in development.
5. GLP-1 price concessions will not reset the market
About three-quarters of the attendees in our live poll said stricter prior authorization is the main tool they or their clients use to hold down GLP-1 costs. By the end of 2026, semaglutide will lack patent protection in about 160 countries, home to 84% of the world's obese population, where the manufacturing cost could run as low as $28 per person per year for injections.
I asked Joe whether any of that leads to a fundamental reset in US drug prices, and he sees two reasons for caution. Manufacturers can give ground on one very public drug and hold or raise prices on the rest, and GLP-1 use still has room to grow. "Even if you get moderate price decreases over the next few years in GLP-1s, do you see an offsetting or overpowering increase in utilization? I think for GLP-1 in particular, that is a risk," Huston says. Beyond GLP-1s, "the upcoming pipeline of drugs is very dominated by those biologics, which has pretty powerful implications for employers," Huston adds.
6. A growing share of drug spend never touches the pharmacy benefit
Infused and provider-administered drugs — chemotherapy above all — run through the medical plan because they are given in a clinical setting. For many large employers, they account for 10–15% of total medical spend and are trending at 10–15% a year. Oncology is usually the largest category even though it only touches about 2% of the population.
Where the drug is administered can change the cost by a factor of two, three, or four, because hospitals add facility fees and mark up the drug itself. A pharmacy strategy that only looks at the pharmacy benefit is missing the fastest-growing drug spend in the plan.
Where the leverage lies
Your spend isn’t going up because your employees are getting sicker. It’s up because of pharmacy prices, rebates, patent law, and the location where care happens. And that is exactly why the tools employers have reached for in recent years have not curbed the trend.
What struck me most listening to Joe is how much of the spend still traces back to one person's decision. Someone writes the prescription, chooses the biologic or the biosimilar, and decides where the infusion happens. In the full webinar, Joe shows how far apart individual providers are on prescribing biosimilars and on prescribing GLP-1s when the clinical indications are not there. Watch the session to hear it in his own words.