Originally Published March 5, 2025 | Updated November 12, 2026

Mark Cuban, co-founder of Cost Plus Drugs, called one pharmacy benefits industry practice after another "insane" during a panel at Brown & Brown's Benefits Evolved 2025 event. He was joined by our founder and CEO, Jake Frenz; Avantika Waring, MD, Chief Medical Officer at 9am Health; and Jared Bowcutt, Senior Vice President at Brown & Brown, for a no-holds-barred conversation about pharmacy benefits. The discussion produced a practical roadmap for employers seeking better value, greater transparency, and improved outcomes.

Since that panel, Congress, the Department of Labor (DOL), and the Federal Trade Commission (FTC) have each acted on PBM transparency, which gives employers new tools to apply the panel's advice. Here are seven lessons every employer should weigh as those changes take effect.

Lesson 1: The Legacy PBM Model Is Finally Vulnerable

For decades, a few major players have dominated the pharmacy benefits industry, with the three largest PBMs, CVS Caremark, Express Scripts, and OptumRx, controlling most of the national market (up to 80% in some estimations). This market concentration has made the industry remarkably resistant to disruption.

However, significant cracks are appearing in this foundation.

Jake Frenz, our founder and CEO of SmithRx, observed the current pharmacy benefit landscape: "I think the state of affairs is still dismal."

However, he sees momentum building: "We've broken the dike. I think the flood is coming." Between regulatory scrutiny, media attention, and new market entrants like Cost Plus Drugs, the traditional PBM model faces unprecedented challenges.

That momentum first took shape at the state level. In late 2024, multiple state-level lawsuits have targeted PBMs for their role in inflating drug prices:

• Vermont: In July 2024, Vermont Attorney General Charity Clark filed a lawsuit against two legacy PBMs, accusing them of unfairly driving up prescription drug costs in the state. (Source)

• Texas: In October 2024, Texas Attorney General Ken Paxton sued major insulin manufacturers and legacy PBMs, alleging a conspiracy to inflate insulin prices by 1,000%. (Source)

• Arkansas: In August 2024 the state’s Insurance Commissioner announced fines totaling nearly $1.5 million against four PBMs for making payments below the national average for drug acquisition costs. This action followed a lawsuit by Attorney General Tim Griffin against two legacy PBMs, alleging they increased opioid use by restricting access to less-addictive treatments. (Source)

• Michigan: In November 2024, Michigan Attorney General Dana Nessel sued two legacy PBMs, alleging that PBM business practices contributed to the opioid crisis by manipulating reimbursement rates for opioid reversal drugs like naloxone while allowing opioid prescriptions to be over-distributed. (Source)

• Hawaii: Most recently, Hawaii Attorney General Anne Lopez sued a legacy PBM, alleging they violated state consumer protection laws by artificially inflating prescription drug costs. Hawaii is seeking to hold PBMs accountable for deceptive practices that have contributed to excessive medication costs statewide. (Source)

In 2026, the pressure moved to the federal level when federal PBM reform became law. The Consolidated Appropriations Act, 2026, signed on February 3, 2026, amended ERISA to add PBM compensation disclosure, pass-through of rebates to the plan, audit requirements, and semiannual PBM reporting to group health plans. In the FTC's settlement with Express Scripts, a proposed consent order announced that same month, Express Scripts agreed to offer plan sponsors standard options that delink its compensation from list prices, base member cost sharing on net price, and add drug-level reporting. In October 2026, the DOL's final PBM fee disclosure rule set detailed compensation disclosure and annual audit rights for large self-insured plans, generally those with 100 or more participants, starting with plan years beginning on or after July 1, 2027.

Together, state litigation, federal legislation, and new regulation signal that the legacy PBM model is more vulnerable than ever. For employers, compensation data that legacy contracts once kept out of view is becoming information plan fiduciaries can request, audit, and compare, and employers have more power than they realize to challenge the status quo.

Lesson 2: Longstanding Partnerships Require Regular Assessment

Building strong partnerships with consultants, brokers, and PBMs is essential for effective benefits management. However, even longstanding relationships benefit from regular evaluation to ensure they continue to deliver value.

Cuban shared his perspective as an employer:

"I mean, I can tell you as a self-insured employer myself, what I've learned since we started Cost Plus Drugs. I had my broker, who was my guy... And then I started actually digging into what my guy was doing for me."

This experience highlights the importance of regularly reviewing your broker, consultant, and PBM relationships to ensure alignment with your organization's current needs and goals. Even twenty years of partnership doesn't guarantee that an advisor is providing the most valuable, transparent services available in today's rapidly evolving market.

Lesson 3: Transparency Benefits Everyone in the System

The healthcare ecosystem works best when all participants have access to relevant information. When data is siloed or pricing is opaque, inefficiencies develop that ultimately increase costs.

Dr. Waring explained how limited information affects clinical decision-making:

"As clinicians, we don't actually have any idea—we’re in the dark—about what we’re prescribing. All we can do is make the best decision for the patient in front of us. But not knowing what it is going to cost them, what it is going to cost the payer... it's just a black box."

This disconnect between clinical decisions and financial consequences creates inefficiencies throughout the healthcare system. The right pharmacy benefit partner should provide transparency that benefits all stakeholders.

Lesson 4: Watch for Signs of Inefficient Spending

Understanding the nuances of pharmacy contracts can help employers identify areas where they may be overpaying for medications. Several specific practices were highlighted during the discussion.

Cuban identified indicators that employers should review in their current arrangements:

• Specialty Drug Carve-Outs: “If you have specialty medication carved out, you’re getting ripped off. Period. End of story. Because there’s nothing special about three-quarters of those drugs.”

• Price Disparities for Similar Medications: “They have one biosimilar priced at $14,000 a month and the exact same biosimilar with a different name priced at $3,500 a month.”

• Limited Data Access: If you can’t see net pricing on claims, you may not have the information needed to make optimal decisions.

Lesson 5: For GLP-1 Drugs, Comprehensive Support Delivers Better Outcomes

Weight loss medications like Ozempic and Wegovy have created new challenges for benefits leaders. Their high cost and growing popularity have led to significant budget impacts for many employers. However, the panel suggested that medication alone may not deliver optimal results.

Dr. Waring explained:

“If you’re going to invest your dollars in covering these drugs for your employees, you should invest in a whole clinical model that will support them.”

She noted that clinical trials showing impressive results included comprehensive support systems: "In every single one of those trials, the individuals who were put in them also had to do intensive lifestyle behavior change programs."

Cuban emphasized this point:

“You’re wasting money. You literally are throwing away money if you don’t have a wellness plan associated with it.”

Lesson 6: Strategic Action Creates Meaningful Change

After diagnosing the problems plaguing the pharmacy benefits system, the panel turned to solutions. The panel agreed that employers can no longer afford to be passive participants in a broken system. A proactive, strategic approach to pharmacy benefits protects plan budgets and helps employees access the medications they need without unnecessary financial barriers.

The experts outlined several key strategies that employers should implement to drive meaningful change:

Consider Transparent PBM Models

Legacy PBMs may rely on spread pricing, retained rebates, and formulary incentives that can work against a plan's goal of paying the lowest net cost. Cuban made it simple:

"You need pass-through PBMs. You don't need the traditional PBMs."

Pass-through PBMs like SmithRx operate with radical transparency, charging a flat administrative fee rather than taking a cut from inflated drug prices. Employers that shift to transparent, pass-through models gain more control over their costs, ensuring that savings go back to their organization rather than PBM profits.

Prioritize Data Access

Employers cannot make informed decisions without access to comprehensive claims data. Too often, PBMs withhold key cost information, preventing companies from understanding where their money is actually going. The panel emphasized that employers must demand full access to their own pharmacy data, allowing them to:

• Identify pricing discrepancies

• Negotiate better contracts

• Ensure employees are receiving cost-effective treatments

New federal disclosure and audit requirements give plan fiduciaries a formal way to request this information, but the value depends on employers reviewing it and acting on what it shows.

Explore Alternative Approaches

The pharmacy benefits space is evolving, and employers are no longer limited to the traditional PBM model. The panel discussed innovative approaches that can cut costs while improving access:

• Direct contracting with specialty pharmacies

• Leveraging biosimilars to reduce spend on high-cost specialty drugs

• Working with Cost Plus Drugs and other disruptors that offer lower-cost alternatives

Employers who actively seek out alternatives can significantly reduce costs and increase flexibility in how they provide prescription drug benefits.

Implement Changes Decisively

Identifying the problem is only the first step, and employers still have to act on it. Too many organizations recognize the issues with legacy PBMs yet delay making necessary changes, whether due to bureaucratic inertia, misinformation, or fear of disrupting their current setup.

Jake underscored the urgency of action with a lesson from his time in the Marine Corps:

"I was in the Marine Corps. One of the adages you learn as a second lieutenant on day one is: In any situation, the right answer is always direct, immediate action."

Each renewal cycle spent waiting can mean the plan and its employees keep overpaying while misaligned incentives stay in place. Employers who act decisively, starting with auditing your current PBM contract, demanding transparency, and shifting to cost-saving models, can drive meaningful change.

Lesson 7: Employers Have Significant Market Influence

Perhaps the most encouraging message from the panel was about the latent power employers possess. Despite feeling constrained by the current system, employers collectively represent an enormous economic force that could reshape healthcare.

The panel concluded with a powerful observation from Cuban:

"The most powerful people in the industry aren't sitting up here. They're sitting out there. Hopefully, you all realize the power you have to change health care for everyone in this country."

This recognition of employer market power represents perhaps the most important takeaway from the event. Working with forward-thinking advisors and innovative PBM partners, employers can drive significant improvements in the pharmacy benefits space.

How SmithRx Gets Ahead of PBM Reform

Reform raises the floor on disclosure, but employers still need a pharmacy benefit partner whose contract and incentives align with the plan. We combine transparent economics with a fixed per-member-per-month (PMPM) administrative fee and 100% pass-through of manufacturer rebates, so our compensation does not increase when drug costs rise.

Employers and brokers can review plan performance and claims data through the SmithRx Partner Portal, and our Drug Pathways Engine identifies clinically appropriate, lowest-net-cost options that our teams help members transition to. For plan sponsors preparing for new disclosure and audit requirements, much of the visibility reform now requires is already standard in our client relationships.

The pharmacy benefits industry is at an inflection point, and the 2026 reforms give employers new information to act on. By partnering with consultants and PBMs that prioritize transparency and value, employers can help shape a better future for healthcare.

Frequently Asked Questions

How do PBMs affect employee pharmacy benefits?

PBMs shape what employees pay and which drugs they can access by managing the plan's formulary, pharmacy network, utilization management, and claims processing. Because a PBM's compensation can influence those decisions, employers should evaluate how their PBM is paid alongside the benefit design itself.

What is spread pricing in pharmacy benefits?

Spread pricing occurs when a PBM charges the plan more for a prescription than it reimburses the pharmacy and keeps the difference as revenue. For example, a PBM that pays a pharmacy $50 and bills the plan $60 retains a $10 spread.

What must PBMs disclose to employer plans under the DOL rule?

PBMs serving large self-insured plans must disclose the direct and indirect compensation they expect to receive, including manufacturer payments, spread compensation, pharmacy recoupment, and formulary placement incentives. They must also provide ongoing semiannual disclosures, or quarterly ones if the plan requests them, so fiduciaries can compare actual compensation with what was disclosed.

What audit rights do employer health plans have over their PBMs?

Under the DOL's final rule, large self-insured plans may audit their PBM's disclosures at least once a year using an auditor the plan chooses, and the PBM must generally provide the requested information within 60 calendar days. These requirements apply to plan years beginning on or after July 1, 2027, so employers should confirm audit terms in contracts they renew now.