Decoding Pharmacy Cost Control

The search for employer prescription benefit solutions and the growing interest in HRAs

If you’re an employer feeling the pressure of rising pharmacy costs, you’ve got company. Employers throughout the U.S. are struggling with rising health insurance premiums in response to skyrocketing prescription costs coupled with unprecedented use. Before we dig into the details (and solutions), let’s take a look at some numbers.

Stats for employers to know about pharmacy cost control

1. 24% of health care dollars went to pharmacy expenses in 2024.¹

2. Specialty drug costs are rising at nearly 3x the rate of general medical inflation.²

3. Employers anticipate an 11-12% increase in their pharmacy costs into 2026.¹

4. New gene therapies for conditions like sickle cell or muscular dystrophy carry price tags between $2 million and $4 million per dose.³

5. In 2026, it is common for 2% of plan members to drive more than 50% of total drug costs.²

The GLP-1 spend tsunami

The cost associated with GLP-1 prescriptions has gotten so high it has a new term: spend tsunami. The surge of people using these drugs has caused a financial tidal wave for insurance carriers and employers. 

Influential factors of the GLP-1 spend tsunami are 1) the drugs are very expensive, 2) they are prescribed for months or years vs a one-time cost, and 3) there are a lot of people taking them. 

In fact, GLP-1 spend increased by an estimated 50% in 2025, and employers now face a "frequency cliff" where 10% or more of their workforce may have a prescription that costs $12,000–$18,000 per year.^3,4

North Dakota and Texas support GLP-1 coverage for obesity

As GLP-1 medications grow in popularity for obesity management, states are in the nascency of showing support and requiring coverage.

North Dakota is addressing the issue through its Essential Health Benefits Benchmark Plan. The plan defines which medical services private health insurance plans must cover in the state’s individual and small-group markets. In January 2025, North Dakota updated the Benchmark Plan to require coverage of GLP-1 and GIP drugs for the treatment of morbid obesity and metabolic syndrome.⁵

Texas HB 2412 was introduced in February 2025 and proposes that health benefit plans in Texas provide coverage for GLP-1 to treat obesity;⁶ the bill is with the insurance committee. Employers with self funded plans are exempt from state mandates⁷ but could face increasing premiums for stop-loss insurance if they have a large percentage of employees using GLP-1s for obesity.

Pharmacy benefits managers

How PBMs impact costs of employer pharmacy benefits

Pharmacy benefits managers play an influential role in prescription drug costs. They decide the list of drugs an insurance policy will cover (the formulary), and they negotiate discounts (called rebates) with drug makers in exchange for deciding that a drug is on the list. The PBM also decides how much an employee pays for a prescription and how much the employer pays.

Pharmacy benefits managers can be controversial. While some argue there should be PBM reform,⁸ it could be a far-off solution.

Pharmacy benefit solutions: How to negotiate cost savings

If you want to continue working with your PBM, negotiating your contract is the first step in cost savings. Some of the most important things an employer can look at in their PBM contract are spread pricing, rebate retention, and drug pricing benchmarks.

Spread pricing is when a pharmacy benefits manager charges the employer more than it pays the pharmacy. 

Action: Avoid spread pricing by exploring a cost-plus or flat-fee model.

Rebate retention is when a PBM keeps some or all of the drug manufacturer rebates instead of passing those savings back to the employer (giving the PBM a kickback). Rebate retention is often hidden under terms such as administrative fees, data sharing fees, or price protection rebates.

Action: Avoid rebate retention by exploring a 100% pass-through contract.

Drug pricing benchmarks are used to determine how much prescriptions cost. NADAC is the National Average Drug Acquisition Cost; it is the most transparent benchmark and reflects real-world market costs. AWP is Average Wholesale Price, and it’s what most PBMs use. The problem? AWP is often called "Ain't What's Paid" because it’s an inflated list price that likely contains hidden markups. 

Action: Avoid pharmacy cost markups by asking for NADAC-based pricing.

HRAs as a pharmacy cost-control solution

In the fight for health insurance risk management, HRAs are surfacing as a highly effective solution. They are designed to help employers control their budget and for employees to have flexibility and choice.

Here are some of the main draws of HRAs as a financial strategy:

• 100% budget control

• Accurate forecasting

• Cost-cutting opportunities

• Financial relief for CFOs

Do HRAs cover prescriptions?

Yes, HRAs can be used to cover prescriptions. Employers can reimburse for both brand-name and generic medications tax-free.
 
The IRS determines what is approved as a qualified medical expense,⁹ and the list is extensive. While an employer does have authority to opt out of specific medications, employees still have incredible flexibility because they don’t need a prescription for most of the items to qualify for reimbursement.¹⁰

Overview of medications covered by HRAs

This is not an exhaustive list, but it gives an overview of medications that are reimbursable with an HRA. Employers have control over their design plan and can tailor covered medications.

Pain and allergy relief

• Pain relievers: acetaminophen (Tylenol), ibuprofen (Advil/Motrin), aspirin, and naproxen (Aleve)

• Allergy and sinus: antihistamines (Claritin, Zyrtec, Benadryl), decongestants, and nasal sprays

• Topicals: anti-itch creams (hydrocortisone), calamine lotion, and medicated patches for muscle pain

Digestive health

• Antacids: Tums, Rolaids, and acid controllers like Nexium or Prilosec

• Stomach remedies: Pepto-Bismol, anti-diarrheals (Imodium), and laxatives

• Motion sickness: Dramamine or medicated wristband

First aid and wound care

• Basics: Bandages, gauze, medical tape, and liquid bandages

• Antiseptics: Rubbing alcohol, hydrogen peroxide, and antibiotic ointments (Neosporin)

• Diagnostic tools: Thermometers, blood pressure monitors, and pulse oximeters

Respiratory and cold/flu

• Cough and cold: Cough syrups, throat lozenges, and chest rubs (Vicks)

• Breathing aids: Saline nasal rinses (Neti pots), vaporizers, and (select) asthma inhalers

Menstrual care products

• Tampons and pads

• Menstrual cups and sponges

• Period underwear

Sexual health and family planning

• Contraception: Birth control pills (require Rx), condoms, and spermicides

• Testing: Pregnancy tests and ovulation predictors

• Fertility: In-vitro fertilization (IVF) and related medications

Baby care

• Eligible: Diaper rash ointments, baby electrolytes (Pedialyte), and nasal aspirators

Weight control and GLP-1 medications

Note: While the IRS allows these medications to be covered, most of these require a letter of medical necessity or a specific diagnosis to be eligible for HRA reimbursement.

• GLP-1 and GIP medications: semaglutide (Wegovy/Ozempic) and tirzepatide (Zepbound/Mounjaro) when prescribed for a diagnosed condition like obesity or type 2 diabetes

• Oral weight loss medications: phentermine (Adipex-P), naltrexone-bupropion (Contrave), and liraglutide (Saxenda)

• Weight loss programs: Fees for programs like WeightWatchers or clinical weight management plans (provided they are prescribed to treat a specific disease like hypertension or obesity)

FSA vs HRA for prescriptions

People often ask whether it’s better to use an FSA or HRA for prescriptions. The short answer is it depends. Comparing the two is not apples to apples since they’re different funding methods, but there are key points to consider.

A notable difference is that an FSA is funded by an employee’s earnings, and an HRA is funded by an employer’s monthly allowance to the employee.

Comparing FSAs and HRAs as funding methods for medications

Why a Take Command HRA could be a good fit for managing pharmacy costs

There are a lot of reasons to consider a Take Command HRA for your small business, mid-market company, or enterprise. Your employees get to choose their own health plan from the ACA or state marketplace. You get complete budget control and predictability, and Take Command is your guide for learning about and implementing the HRA you choose.

When it comes to managing pharmacy and GLP-1 costs, a Take Command HRA is a strategic move. It lets you design your health benefits plan with exacting specifications, and it lets you control your budget down to the penny. You don’t deal with pharmacy benefit managers at all, and GLP-1 risks are out of the picture.

If you’re curious about the financial benefits you could reap, connect with a Take Command HRA expert, and we’d love to help.

ICHRA for brokers

The world of health insurance gets more complicated (and expensive) by the day. If your clients are looking for a simpler solution, consider ICHRA.

ICHRA for brokers

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Contact Take Command to learn about HRAs

While pharmacy cost management is a benefit of HRAs—it’s only the beginning. Connect with a Take Command HRA expert, and we’ll walk you through everything you need to know about prescription coverage solutions and the wealth of benefits that HRAs provide.

References

1. Business Group on Health. 2026 Employer Health Care Strategy Survey. August 2025. Available at: https://www.businessgrouphealth.org/resources/2026-Employer-Health-Care-Strategy-Survey
2. https://www.wtwco.com/en-us/insights/campaigns/insights-to-action-the-wtw-healthcare-financial-benchmarks-survey 
3. https://www.aon.com/en/insights/reports/the-global-medical-trend-rates-report 
4. Evernorth Health Services. 2025 Drug Trend Report: The GLP-1 Evolution and the 2026 Tipping Point
5. https://www.benefitspro.com/2025/01/13/state-becomes-first-to-add-wegovy-like-drugs-to-essential-health-benefits-package/ 
6. https://capitol.texas.gov/tlodocs/89R/billtext/html/HB02412I.htm
7. Section 514 of the Employee Retirement Income Security Act of 1974 (ERISA)
8. https://www.ama-assn.org/health-care-advocacy/access-care/what-are-pharmacy-benefit-managers-pbms-and-why-we-need-reform
9. https://www.irs.gov/publications/p502
10. Internal Revenue Code Section 213(d)