Prescription drug spending represents a significant and growing part of total health care in the U.S. From January 2022 to January 2023, over 4,200 drug products experienced price increases, with approximately 46% outpacing inflation.
While new legislation such as the Inflation Reduction Act is helping to keep healthcare costs more manageable, there are other things that employers can do to minimize prescription drug cost increases for both their workforce and their bottom line.
Find out the primary drivers of prescription drug cost increases and strategies to control costs, such as investing in employee benefits consulting.
Primary Drivers of Prescription Drug Cost Increases
Recognizing what’s driving up drug costs can help employers develop strategic ways to lower their healthcare spending. Some of the leading drivers of prescription drug cost increases include:
Specialty Drugs
According to the 2025 Segal Health Plan Cost Trend Survey, specialty drug costs are projected to rise by 13.3%. With the increase in specialty drug trends, these high-cost treatments replace lower-cost alternatives. They are expensive to develop and manufacture due to their complex biological nature and lack competition in the market, as they can often treat rare diseases and require special handling and administration.
Innovative, High-Cost Therapies
The complex research and development process of creating innovative therapies can contribute to higher prescription drug costs. This is especially common with new single-sourced brand drugs and gene therapies, which are driving up costs as groundbreaking treatments enter the market.
Utilization Increases
As prescription drug use increases, so does overall expenditure. Survey findings showed that utilization accounts for almost 60% of the specialty drug cost increase before rebates. Utilization can occur for several reasons, such as new indications for a drug, more effective disease identification, and changes in disease prevalence.
Strategies Businesses Can Adopt to Control Costs
Many businesses struggle to control prescription drug costs amongst annual increases. However, there are several strategies that employers can adopt to lower the cost of prescription medications to benefit their employees and themselves. Some of these strategies include the following:
Leverage Pharmacy Benefit Management (PBM) Services
Pharmacy benefit managers (PBMs) are third-party companies that help manage prescription drug benefits for health insurance companies, employers, and other customers.
With PBM services, businesses can save on prescription drug costs by utilizing their ability to negotiate large discounts and rebates with drug manufacturers, promote generic drug usage, create preferred pharmacy networks, monitor drug utilization patterns, and manage high-cost specialty medications. Employers should consider analyzing PBM contracts to look for savings opportunities.
Educate and Empower Employees to Make Smaller Healthcare Choices
Saving on prescription drug costs often involves communicating with employees about their healthcare choices. Employers should educate their workers on the benefits of generics and biosimilars and check that their health plan encourages using these cost-effective alternatives.
Incentivize cost-effective behavior and provide employees with the necessary cost-transparency tools to show how making smaller healthcare choices can benefit their wallets.
Implement a Biosimilar Strategy
When developing and implementing a biosimilar strategy, focus on educating healthcare providers and patients about the efficacy and safety of biosimilars. Collaborate with your PBM to provide education at the point of care and confirm that employees and prescribing doctors are comfortable transitioning to cost-effective biosimilars whenever clinically appropriate.
Emerging Technology and Innovations in Prescription Drug Management
New technologies and innovations are improving prescription drug management, saving employers significant time by utilizing automated dispensing systems, electronic health records, remote patient monitoring, artificial intelligence (AI) for drug interaction checks, telepharmacy, and medication therapy management. There are many essential aspects of technology in prescription drug management, including:
Digital Health Tools for Medication Adherence
Innovative digital health tools can promote medication adherence and increase the likelihood of employees taking their medications as prescribed for better health and wellness. The right technology can help employees stay compliant with their prescription plans. These tools can also help limit waste and reduce the risk of emergency health procedures that may be needed for patients who do not take their medications optimally.
Prescription Medicine Initiatives
Prescription drug management initiatives, such as prescription drug management plans, can help deliver prescription drugs in a cost-effective and clinically appropriate way. They are often provided by PBMs or through an integrated delivery system. Precision medicine promises to right-size drug therapies for individual employees, avoiding the one-size-fits-all medications that can result in waste or ineffective treatments.
Learn How New City Can Help With Soaring Costs
Increased spending on prescription drugs is continuing to strain employers’ wallets. It is creating challenges for employees in need of their prescriptions. With employee benefits consulting from New City Insurance, we aim to help businesses gain greater control over rising prescription drug costs through efficient and cost-effective strategies.
Partnering with a PBM, offering incentives to employees that promote generics and biosimilars, and investing in upstream health improvements can help lower prescription drug costs for employers. Contact New City today at 888.210.2765 to learn how much you could save.