A Smarter Way to Lower Drug Costs: How Transparency and Innovation Can Redesign Pharmacy Benefits

Crippling drug costs is uniquely an American burden, with the U.S. paying 2.5 times more for medications than those in other high-income nations. This weighs heavily on consumers and businesses. According to a recent KFF poll, 82% of Americans say drug prices are unreasonable, and three in ten adults report not taking their medications as prescribed because of cost. Rising drug costs also place a heavy burden on employers, who continue to see rapid growth in pharmacy benefit spending, which threatens the sustainability of employer-sponsored health insurance.  

Prescription drug costs in the U.S. have gone up more than ten-fold in the last 40 years from $30 billion in 1980 to $348 billion in 2020. While many factors contribute to high drug prices, the pharmaceutical companies play a key role. Strategies to maintain market share have kept prices high. These include filing multiple patents on the same drug to delay competition, suing generic companies and introducing “follow-on” drugs, which extends the market exclusivity of the original drug through the creation of a new drug that’s structurally similar. These and other industry tactics have made prescription medications more expensive for consumers and payers alike.

Another major driver of high drug costs is the lack of transparency throughout the pharmaceutical supply chain. While certain entities were created to pool purchasing power and streamline prescription drug benefits, many have evolved into opaque structures with complex pricing mechanisms that only drive-up costs for patients. The industry needs stakeholders that manage prescription drug benefits for insurers, large employers, and government funded programs like Medicare and Medicaid, but they must exist to help lower cost and increase access to medications.           

Market-Based Solutions on the Rise 

The pharmacy benefits market is shifting as employers and regulators recognize certain intermediaries’ role in rising drug costs that limit patient access and strain businesses. The current system is giving way to a market focused on transparency, accountability, and affordability.

Transparent pharmacy benefit managers (PBMs) and innovative medication contracting organizations are disrupting the industry by providing visibility into drug costs, adopting straightforward pricing models, passing 100% of manufacturer rebates to plan sponsors, and eliminating spread pricing.

Here at Synergie Medication Collective, for example, we are bringing together Blue Cross and Blue Shield-affiliated companies to work collaboratively with the pharmaceutical supply chain entities to lower the cost of medications for nearly 100 million Americans receiving high cost medications covered by their medical benefit. Specialty drugs, which make up 55% of total drug spend with 35% of the specialty spend covered under the medical benefit, have been the biggest driver of cost growth. Through Synergie’s model, access to life-changing medications is now available as challenging hurdles have been reduced.  

The Future of Pharmacy Benefits: A Tipping Point

The companies that embrace new models of drug purchasing that prioritize transparency, increased access to needed medications, and consumer-first pricing will emerge as the leaders in this evolving market. The era of incremental change is behind us. Addressing drug pricing will require bold, strategic moves that benefit employers, consumers, and the entire healthcare system. However, no single approach will be sufficient. It will take a collective effort from all corners of the industry—innovative PBMs and drug purchasing organizations, drug manufacturers, health plans, employers, and lawmakers—all testing different strategies to drive real transformation for the American public. Together, these bold steps will reshape the pharmacy benefits landscape to ensure it works for everyone.