Why America’s Largest Employers Are Switching PBMs

America’s largest employers—the organizations responsible for the health benefits of millions of employees—face significant challenges in managing their pharmacy spend. Benefits and HR teams at these companies must balance soaring costs of medications with their duty to provide high-quality care, a positive experience for their employees and dependents, and ensure compliance across large, diverse workforces. 

For most large-scale employers, historically, they’ve put their trust in legacy pharmacy benefit managers (PBMs) to pull it off. Yet, these legacy players in the PBM landscape have offered an unsatisfying status quo: complex contracts, opaque pricing, limited insight into true cost drivers, and antiquated member experiences. 

Though roughly 80% of the PBM market is controlled by legacy PBMs, they’re not large-scale employers' only option. Driven by a relentless need for accountability and value, more and more of America’s largest employers are seeking out and switching to modern PBMs. Let’s explore the key drivers behind this growing movement and dive into how modern PBMs are ready to meet the demands of large, national organizations.

The PBM Landscape for Large Employers

Common Challenges

The complexity and stress of executing benefits for large employers is significant. HR and benefits teams are faced with the stress of overseeing decisions that impact the health, financial well-being, and medical access for tens of thousands, or hundreds of thousands, of members. It’s a tremendous responsibility—and the existing legacy PBM model makes this responsibility unnecessarily difficult.

• Low Visibility into Climbing Costs: Employers face ever-escalating pharmacy costs but often have limited visibility into the true drivers of that spend.

• Opaque Financial Models: Complex, opaque rebate and pricing models often confuse and obscure the true value—or lack thereof—a legacy PBM is providing.

• No Option Flexibility: Legacy, incumbent PBMs surface cookie cutter partnership models that rarely adapt well to the scale and complexity of a national corporation that has members with complex medical needs.

Impact on Costs and Member Experience

The consequences of this outdated system are felt both by companies' bottom lines and their employees. 

• Escalating Spend without ROI: Pharmacy spend continues to rise without clear, measurable return on investment in employee health.

• Fragmented Member Experiences: The member experience is often disjointed across employee populations with diverse care needs, leaving members on their own to navigate complicated processes and paperwork.

• Reduced Medication Access: When costs are high for the employer, out-of-pocket expenses are typically cost-prohibitive for the employee, which can, in turn, reduce medication adherence and access to necessary treatments. Medication access may be limited to only certain pharmacies, which are often owned and managed by the PBM, opening employers up to pricing games, misaligned incentives, and even higher cost share for members. 

• Increased Pressure to Act: Employers face mounting pressure from employees, HR teams, and other stakeholders for clarity, accountability, and demonstrable savings when it comes to pharmacy benefits. More and more lawsuits are being filed when businesses fail to meet their fiduciary obligations to members. 

Why Large Employers Are Reevaluating PBMs

Switching PBMs is a high-stakes, multi-year decision, and it is almost always triggered by two core demands that incumbent pharmacy benefit managers fail to deliver on.

Demand for Radical Transparency

The enterprise-scale benefits market is moving away from opaque pricing to a more transparent, “show me the math” model. More and more large employers are putting their foot down and not letting a discount-based, murky pricing structure slide. A newer, more transparent model requires:

• Clear Visibility: Full visibility into and clarity around contract terms, true drug acquisition costs, and the complete flow of rebates.

• Eliminating Conflicts of Interest: Businesses are moving away from PBMs that have complex vertical integration and conflicts of interests in order to eliminate hidden spreads, clawbacks, and other practices that undermine true cost savings. 

Emphasis on Long-Term Value Creation

While rebates are still important, it is no longer enough to chase the highest rebate check. The focus has shifted to strategies that deliver sustainable, long term value. Vendors who are designed to support long-term value will have:

• Sustainable Cost Control Methods: Moving beyond rebates maximization toward clinically-sound, sustainable cost-containment strategies that prioritize member health.

• Aligned Incentives: A model where the PBM’s financial incentives are fully aligned with the employers goals for affordability and improving member health outcomes. 

Key Triggers for Switching PBMs

While the desire for change is constant in a broken legacy system, specific events often serve as the catalysts for a PBM switch:

• Member Experience: Reports of poor customer service, difficulty with prior authorizations, disjointed processes, or escalating member costs frequently force an employer’s hand. This is often the most common and pressing reason for a PBM switch at large companies.

• Renewal Cycles: A contract renewal that exposes aggressive cost escalations or unsatisfactory terms compared to the market.

• Growing External Pressure: Advocacy from boards, benefits consultants, or employee coalitions pushing for greater accountability and better stewardship of benefit dollars.

• Innovation Gap: A clear interest in advanced clinical programs, sophisticated data-driven cost management, and superior reporting that the current PBM is unable to provide.

What Large Employers Should Look for in a PBM

When a large employer enters the market for a new PBM, their requirements are often non-negotiable and enterprise-grade in scale. First and foremost, they should demand transparent pricing. This necessitates true pass-through models that guarantee all financial benefits, including rebates and discounts, are passed directly back to the client and members. It is worth noting that legacy PBMs can still manipulate pass-through processes to serve their own interests exclusively. Be sure you’re working with a totally transparent, modern PBM that works to get you the lowest-cost pricing.

Just because these are enterprise level agreements, doesn’t mean that they need to be needlessly complicated or confusing. Contracts with your PBM should be simple and straight-forward. Where legacy PBMs may use complex legal jargon to obscure terms, modern PBMs that serve large employers will present clear financial terms that make accountability straight-forward. 

Beyond finances, large employers should seek out modern PBMs with scalable clinical solutions, which include integrated programs such as clinically-driven formulary management, a proactive and member-centric approach to prior authorization, and expert oversight of high-cost categories. 

Finally, large businesses need data to succeed. The right partner will provide actionable insights and data proactively to businesses. This includes advanced analytics and robust, executive-level reporting that moves past simple tracking to provide real-time, actionable information for strategic decision making. A modern PBM may even give businesses predictive insights to help identify trends, manage risk, and forecast potential cost drivers across large, diverse employee populations. 

How SmithRx Supports Large Businesses

SmithRx was created from the ground up with a fully transparent, aligned, and enterprise-ready model that eliminates the conflicts of interest baked into legacy systems. We are uniquely positioned to effectively handle the specific challenges large, enterprise-scale employers face when containing pharmacy spend and improving member experience.

• Radical Transparency: SmithRx operates on a 100% pass-through model with a simple, fixed administrative fee. There are no hidden spreads, no rebate retention, and no obscured revenue streams. This complete alignment is the foundation for a trusting partnership.

• Actionable Data and Reporting: Our clients receive true access to data and sophisticated, customizable reporting. This means executive teams and benefits leaders have the actionable insights they need to understand spend, forecast risk, and report to their boards with confidence.

• High-Cost Drug Management: SmithRx employs cutting-edge clinical strategies to manage high-cost drugs, including an industry-leading approach to biosimilars. This includes a focus on maximizing the use of clinically appropriate, lower-cost biosimilar alternatives for significant savings.

• Exceptional Member Experience: SmithRx members receive the highest quality of care from our in-house clinical and service teams. Our entirely US-based team is equipped to handle large-scale client volume effectively: members wait under 7 seconds on average to get a live agent on the phone and we have industry-leading prior authorization turn around times. Members also have access to our comprehensive pharmacy network of over 65,000 locations and convenient, mail-order options. 

For large organizations, this combination of complete financial transparency and data-driven clinical management translates directly into measurable, sustainable savings and a streamlined member experience. 

This is possible with the SmithRx Drug Pathways Engine. It continuously analyzes cost-saving options, ensuring every member gets the most effective medication at the lowest net cost. For example, one of our clients, a top national food and beverage distributor, was able to realize 35% savings resulting in $21.99 per-member, per-month (PMPM) savings.

The era of accepting the status quo of legacy PBMs is over. America’s largest employers are demanding better for their businesses and employees. Where are they finding a brighter future? With innovative, fully-transparent partners like SmithRx. 

If your organization is seeking to gain control over escalating pharmacy costs, elevate the member experience, and partner with a PBM whose incentives are 100% aligned with your own, it’s time to explore how SmithRx is redefining the PBM experience for large organizations. Schedule a time to speak with our team to see the difference a modern PBM can make.