SHRM26 Debrief · Compensation & Benefits · #1212

The Hidden Cost of Pharmacy Benefits: How HR Leaders Can Unlock 30–40% Savings Without Disrupting Employee Care

with Eric Porter

& Eric Papp

▶ Watch on the SHRM portal ~78 min, distilled

Pharmacy benefit managers (PBMs)Spread pricingRebates

"Nobody really brags about a discount if the final price is still higher than what you could have paid, right?"

What it was about

Legacy pharmacy benefit managers (PBMs) hide profit in spread pricing, opaque rebates, and vertical integration, but employers can unlock 30-40% pharmacy savings by moving to a transparent, pass-through PBM model without disrupting most employees' care.

By the numbers

at least 30%

Savings opportunity from shifting focus from rebates/guarantees to total cost

60% off / $2,700 per month / $24,000 per year

Discounted price still charged for Humira despite the 60% discount

20X ROI

Return on investment cited in the national union case study

Key notes

Calculate your true pharmacy cost using PMPM (per member per month): total annual pharmacy spend divided by members divided by 12. Compare it to the legacy PBM average of about $116 PMPM versus a pass-through PBM average of about $84 PMPM.
Request your last 12 months of pharmacy claims data (or at minimum the top 25-50 highest-cost drugs) from your broker or PBM, since it is your company's data and legacy PBMs sometimes resist sharing it.
Review your PBM contract for red flags: spread pricing, opaque rebates or rebate guarantees, conflicted ownership/vertical integration, weak audit rights, and lock-in penalties for early termination.

The contrarian takeGuaranteed rebates and 'transparency' claims from legacy PBMs are framed as red flags rather than reassurances: a rebate guarantee is presented as evidence the PBM is retaining excess profit. Going from fully insured to self-funded is framed as trading known costs for opaque risk, since, as the speaker put it, you 'don't know what you're getting yourself into until you actually do it.'

Take this back Monday

Do this for your team

Request last 12 months of pharmacy claims data from your broker/PBM to see the true PMPM cost driving your renewal.

Say this in your next leadership meeting

We're likely overpaying for pharmacy through spread pricing and rebate guarantees, and a pass-through PBM could cut costs 30-40% without disrupting most employees' care.

Watch out for

Treating pharmacy benefits as a 'set it and forget it, look at it once a year' issue instead of an ongoing bottom-line cost issue.
Assuming rebates and discounts are automatically a good deal without checking the actual net cost of the drug (the 'Publix milk' analogy: a 50%-off $14 item is still worse than an always-$5 item elsewhere).
Signing multi-year (e.g., three-year) PBM contracts that look good upfront but lock the employer in as pricing dynamics change.

Fun fact · Eric Papp

Eric Papp is a published author of two leadership books and has personally trained thousands of managers across North America.

If this landed, see these

↳ Go deeperFuture Proofing Your Health Benefits: A Panel Discussion on Multi Year Planning and High Performance Program DesignPushes PBM scrutiny into full fiduciary governance of network, TPA, and stop loss.⇄ The counterpoint2026 Annual SHRM Employee Benefits Survey ResultsSuggests the real 2026 savings lever isn't PBM tactics but a broader benefits recalibration.✦ The unexpected oneTalent Intelligence on a Shoestring: Turning HR Data into Board InsightsThe PMPM math only lands if you can pitch it like a board-ready talent story.