U.S. employers and benefits advisors are bracing for another steep rise in health care spending this year. Employer-sponsored health plan costs are expected to climb as much as 10% in 2026, according to the International Foundation of Employee Benefit Plans. That marks the largest increase in nearly 20 years.
Equally troubling is that higher spending is not translating into a healthier workforce. At least 75% of adults in the U.S. live with one or more chronic conditions and 40% are classified as obese, according to data from the Centers for Disease Control and Prevention (CDC). This indicates increasing strain on benefits budgets while undermining employee wellbeing and productivity.
As costs accelerate and outcomes stagnate, advisors and employers are looking more closely at what's driving pharmacy spend. For many organizations, the traditional pharmacy benefit manager (PBM) model is coming under scrutiny. And rightfully so.
A growing push to rethink the PBM status quo
Conventional PBM arrangements often leave advisors and employers with limited transparency or insight into drug pricing, restricted flexibility in benefit design, and incentives that may not align with plan sponsors or members. These challenges are prompting benefits leaders to explore alternatives, particularly models that separate pharmacy and medical benefits as a path toward cost containment, improved employee outcomes and long-term sustainability with the increased pharmacy focus.
This shift reflects a broader movement among advisors and employers to challenge entrenched industry structures. Nearly two-thirds of employers have either moved away from or are actively evaluating alternatives to the "Big Three" PBMs, according to the National Alliance of Healthcare Purchaser Organizations. Many are turning to independent PBMs that are free of conflicts of interest or ownership ties to major insurers.
For employers, the goal is not simply to change vendors, but to work with a pharmacy partner that prioritizes transparency, accountability and better health outcomes for employees. Benefits advisors can help lead employers to pick the right PBM partnership.
What's driving the change in pharmacy carve-outs?
Under a traditional carve-in arrangement, medical and pharmacy benefits are administered together under a single bundled health plan. Employers do not contract directly with a PBM, and pharmacy costs are often embedded within broader medical spending. While convenient, this structure can obscure true drug costs, limit customization, and reduce transparency and employer oversight.
A carve-out model takes a different approach. Self-insured employers contract directly with an independent PBM while maintaining coordination with their medical carrier. This separation allows for greater visibility into pharmacy spend, more flexibility in plan design and the ability to deploy pharmacy-specific strategies that enhance care and directly address rising drug costs.
When executed well, a carve-out does not fragment care. Instead, it enables employers to better manage one of the fastest-growing components of health care spending.
The why of carving out
Deeper pharmacy expertise and cost control
In bundled models, pharmacy benefits often receive minimal strategic attention. Account teams tend to focus on medical insurance, leaving HR leaders without clear guidance on pharmacy trends or cost drivers.
Independent PBMs, by contrast, are pharmacy specialists. They bring focused expertise in managing high-cost medications through strategies such as formulary optimization, biosimilar adoption and structured GLP-1 management programs. These capabilities are often weaker in carve-in arrangements.
True transparency and more predictable costs
Transparency has become a priority for executive teams, yet not all transparency claims are created equal. Many traditional PBM models still rely on pricing structures that conceal spreads, rebates or secondary revenue streams.
In a carve-out arrangement, genuine transparency typically means pass-through pricing: employers pay exactly what the PBM pays the pharmacy, plus a clearly defined administrative fee. There are no hidden margins, undisclosed rebates or financial conflicts of interest. This clarity also supports more accurate forecasting and budget planning.
Innovation that improves member care
The best independent PBMs invest in in-house clinical programs and dedicated pharmacist teams that deliver personalized support at key moments in a member's treatment journey.
For example, when an employee begins therapy with a GLP-1 medication, proactive pharmacist outreach can help improve adherence, manage side effects, reduce early discontinuation, and prevent unnecessary drug waste. Many programs also emphasize sustained lifestyle and nutrition changes, supporting better long-term outcomes while controlling costs.
Busting myths
Despite their advantages, carve-outs are sometimes misunderstood.
It's too complex. While a carve-out does introduce an additional vendor, experienced independent PBMs are adept at coordinating with medical carriers. With help of a benefits advisor and choosing the right partner, employers can achieve seamless integration and high service levels.
Daunting fees and restrictions Some carriers impose contractual disincentives to discourage unbundling. However, for many organizations, the long-term financial and strategic benefits of a carve-out outweigh any short-term penalties. Employers should work closely with benefits advisors and PBM partners to evaluate contract terms and model outcomes.
Haven't heard of it Many employers simply haven't been exposed to alternative PBM models or the considerable value a carve-out can provide. This underscores the importance of knowledgeable benefits advisors who can educate stakeholders and quantify potential savings and clinical improvements.
Three critical questions before selecting a carve-out PBM
For HR and benefits leaders considering a carve-out strategy, these questions can help identify the right partner:
- Who owns the PBM?
Ownership matters. PBMs backed by venture capital may prioritize rapid growth and investor returns over operational excellence and service quality. Benefits advisors and employers should look for organizations with stable, aligned ownership structures that support long-term investment in member care and service quality rather than short-term metrics. - Are clinical programs built internally or outsourced?
In-house solutions typically deliver superior service, tighter integration, and better alignment with your company's unique needs and workforce. External partnerships often introduce coordination gaps, slower response times, and a one-size-fits-all approach that doesn't fit your workforce. - How do members access personalized support?
First-rate PBMs provide direct access to pharmacists, proactive outreach for complex therapies and responsive service when members need help the most. It's a clear alternative to long call holds, phone trees, and disconnected systems.
Innovate and challenge the status quo
With PBM practices under the microscope and employers and benefits advisors alike demanding change, forward-thinking organizations are seizing the carve-out advantage to unlock transparency, cut costs and deliver better care. Leaders who act now will set the standard for the next decade of benefits strategy. Don't wait for the industry to change. Be the change.
Adrienne Williams LaBorwit is True Rx Health Strategists' Chief Executive Officer and a visionary for changing the world of health care, one patient at a time. True Rx Health Strategists is a pharmacist-owned, patient-first PBM focused on health innovation that lowers costs, genuine care and outstanding service in every interaction.
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