Nearly all employer-sponsored health plans in the U.S. include some form of prescription drug coverage, and the Affordable Care Act requires individual and small-group marketplace plans to cover it as an essential health benefit. That coverage typically runs through a Pharmacy Benefits Manager (PBM), a third party that negotiates prices, manages the formulary (the list of covered drugs), and processes claims. The scope, cost-sharing, and limitations still vary a lot between plans. Employees need to understand what their plan covers, and employers need to manage the PBM relationship with care.
How Drug Coverage Works
Prescription drug benefits aren't a simple flat-fee system. They're built to steer usage and control costs through a handful of moving parts. First, the formulary. Drugs are grouped into tiers: generics (cheapest), preferred brands, non-preferred brands, and specialty drugs. The member's out-of-pocket cost depends on the tier, usually a copay (a fixed dollar amount) or coinsurance (a percentage), and many plans add a separate pharmacy deductible that must be met first. Then there's prior authorization, which requires the doctor to justify expensive or risky drugs before coverage kicks in. Step therapy pushes members to try cheaper generics before the plan covers pricier options. Plans also set quantity limits, and some require members to fill prescriptions at specific pharmacies for full coverage.
Why the Old PBM Model Is Broken
Almost every plan covers drugs, but the traditional PBM model has real problems. It is opaque, and the incentives are often misaligned in ways that cost both employers and members. One major issue is spread pricing: the PBM charges the plan more for a drug than it pays the pharmacy and keeps the difference. Then there is the rebate game. PBMs collect rebates from drug manufacturers for placing drugs on the formulary, but those savings don't always flow back to the employer or the plan. Pharmacy data also often sits in a silo, disconnected from medical and wellness data. Roughly 20–25% of total U.S. healthcare spending is wasted, and pharmacy pricing practices such as spread pricing and specialty markups account for a meaningful share of it. That is why employers are hunting for transparent alternatives that align cost control with member health.
New Federal and State Rules Push PBM Transparency
The transparency employers have been asking for is now being written into law and regulation. In July 2024 and January 2025, Federal Trade Commission staff reports documented that the three largest PBMs (CVS Caremark, Express Scripts, and Optum Rx) process roughly 80% of U.S. prescription claims and mark up specialty generic drugs for cancer, HIV, and other conditions by hundreds or thousands of percent. All 50 states have now passed laws regulating PBMs, and 26 states enacted new PBM legislation in 2025 alone. At the federal level, the Consolidated Appropriations Act of 2026, signed February 3, 2026, makes full rebate pass-through the default for ERISA-covered plans and gives plan fiduciaries a legal basis to demand and enforce remittance. The Department of Labor has also proposed a rule requiring PBMs to disclose their compensation to plan fiduciaries. Employers reviewing a pharmacy contract now have federal law behind them when they ask where every dollar goes.
A Better Way: The Health-to-Wealth Ecosystem
Rather than treating pharmacy coverage as an add-on to a benefits plan, forward-looking strategies redesign how it integrates with health and financial wellness. That is the core of the Health-to-Wealth™ approach. WellthCare™, the first Health-to-Wealth™ Benefit System, includes a transparent pharmacy arm that replaces the traditional PBM with a cost-plus model, typically cutting drug costs by 20–40% and returning the savings to the plan and members. The approach works like this:
- AI-drafted, clinician-reviewed care plans include medication adherence as a key health action.
- A transparent pharmacy arm, such as WellthCare Pharmacy™, replaces the old PBM with a cost-plus model and returns savings directly to the plan and members.
- Members earn reward dollars at the WellthCare Store™ for verified health actions such as medication adherence, and employer-committed savings fund automatic retirement contributions.
- Integrated pharmacy data feeds the WellthCare Readiness Index™, which spots clinical intervention opportunities, identifies employees eligible for Medicare, and quantifies savings from switching to a fully aligned self-funded plan.
Pharmacy shifts from an opaque cost center to a driver of employee health and long-term wealth.
Actionable Insights for Employers and HR Leaders
When evaluating prescription drug coverage, go beyond whether it is included and ask tougher questions:
- Demand clear reporting on where every dollar of your pharmacy spend goes, including spreads, rebates, and fees.
- Look for solutions where pharmacy, medical, and wellness data work together to improve outcomes, not only process claims.
- Ask whether your PBM profits more when drug prices rise. If so, consider a fiduciary model or pass-through pricing.
- Make sure employees understand the formulary and how to save with generics and mail order. A clear member app or portal can point them to the lowest-cost option.
The goal is straightforward: turn pharmacy from a cost problem into a tool that builds both employee health and financial wealth.