Opening the “Black Box” on Pharmacy Costs

For most employers, pharmacy benefits administration is an expensive “black box” — money flows in, but information rarely flows out. While general healthcare claims data is largely accessible and somewhat open to synthesis, the way pharmacy costs are determined remains confusing, even to seasoned healthcare experts.

This “black box” effect isn’t accidental. Intentional obfuscation of how prescription drugs are priced and delivered has long enabled middlemen — especially Pharmacy Benefit Managers (PBMs) — to profit through arbitrage between employers, drug companies and manufacturers. While nonprofit groups and congressional efforts have brought some transparency, systemic confusion persists.

However, change may finally be on the horizon. A new executive order signed by President Trump aims to open the “black box” by increasing transparency in drug pricing — giving employers, consultants and brokers a real opportunity to understand true pharmacy costs for the first time.

The new executive order targets transparency in three key areas:

1. PBM Compensation: PBMs will be required to disclose how much they earn from rebates and fees.
2. Provider and Carrier Pricing: Hospitals and insurers must release the prices they pay for pharmaceuticals.
3. Federal Negotiations: The Department of Health and Human Services will refine Medicare drug price negotiations, potentially setting a precedent for broader reform.

While the executive order shows strong intent, one major challenge remains: Even if all this data suddenly becomes available, synthesizing and interpreting it will be no small feat. While this would be a challenge for employers, it’s also an opportunity for savvy consultants, brokers and innovative technology companies like Handl Health. In fact, we think that forward-thinkers will be well positioned to help employers make sense of this new information — offering fresh insights into PBM contracts, formulary options and brand-name drug cost drivers.

In fact, we predict that if this transparency effort gains real traction, the “black box” of pharmacy costs will turn into a “Pandora’s box” for PBMs — revealing needlessly high-priced drugs to the benefit of employers nationwide.