Employers: The PBM House of Cards Is Falling—7 Lessons to Act On

When Mark Cuban declares an industry practice "insane" multiple times during a panel discussion, it's worth paying attention. At Brown & Brown's Benefits Evolved 2025 event, Cuban joined our founder and CEO, Jake Frenz, Avantika Waring, MD and Chief Medical Officer at 9am Health, and Jared Bowcutt, Senior Vice President at Brown & Brown for a no-holds-barred conversation about pharmacy benefits. What emerged wasn't just criticism of the status quo, but a roadmap for employers seeking better value, greater transparency, and improved outcomes.

Here are seven critical lessons every employer should consider as we move forward into this time of reckoning.

Lesson 1: The Legacy PBM Model Is Finally Vulnerable

For decades, the pharmacy benefits industry has been dominated by a few major players, with 80%+ of Americans' prescriptions managed by the three largest pharmacy benefit managers (PBMs): CVS Caremark, Express Scripts, and OptumRx. This market concentration has made the industry remarkably resistant to disruption.

However, significant cracks are appearing in this foundation.

Jake Frenz, our founder and CEO of SmithRx, observed the current pharmacy benefit landscape: "I think the state of affairs is still dismal." With 80% of Americans in a system controlled by three massive PBMs, the market concentration is staggering.

However, he sees momentum building: "We've broken the dike. I think the flood is coming." Between regulatory scrutiny, media attention, and new market entrants like Cost Plus Drugs, the traditional PBM model faces unprecedented challenges.

That momentum is already taking shape in the form of legal action. In the last handful of months alone, multiple state-level lawsuits have targeted PBMs for their role in inflating drug prices.

• Vermont: In July 2024, Vermont Attorney General Charity Clark filed a lawsuit against two legacy PBMs, accusing them of unfairly driving up prescription drug costs in the state. (Source)
• Texas: In October 2024, Texas Attorney General Ken Paxton sued major insulin manufacturers and legacy PBMs, alleging a conspiracy to inflate insulin prices by 1,000%. (Source)
• Arkansas: In August 2024 the state’s Insurance Commissioner announced fines totaling nearly $1.5 million against four PBMs for making payments below the national average for drug acquisition costs. This action followed a lawsuit by Attorney General Tim Griffin against two legacy PBMs, alleging they increased opioid use by restricting access to less-addictive treatments. ​(Source)
• Michigan: In November 2024, Michigan Attorney General Dana Nessel sued two legacy PBMs, alleging that PBM business practices contributed to the opioid crisis by manipulating reimbursement rates for opioid reversal drugs like naloxone while allowing opioid prescriptions to be over-distributed. (Source)
• Hawaii: Most recently, Hawaii Attorney General Anne Lopez sued a legacy PBM, alleging they violated state consumer protection laws by artificially inflating prescription drug costs. Hawaii is seeking to hold PBMs accountable for deceptive practices that have contributed to excessive medication costs statewide. (Source)

This surge in legal action, coupled with increasing regulatory scrutiny and media attention, signals that the traditional PBM model is more vulnerable than ever before. The cracks in the system are turning into fault lines, and employers have more power than they realize to challenge the status quo.

Lesson 2: Partnerships Require Regular Assessment

Building strong partnerships with consultants and vendors is essential for effective benefits management. However, even longstanding relationships benefit from regular evaluation to ensure they continue to deliver value.

Cuban shared his perspective as an employer:

"I mean, I can tell you as a self-insured employer myself, what I've learned since we started Cost Plus Drugs. I had my broker, who was my guy... And then I started actually digging into what my guy was doing for me."

This experience highlights the importance of regularly reviewing all vendor relationships to ensure alignment with your organization's current needs and goals. Even twenty years of partnership doesn't guarantee that an advisor is providing the most valuable, transparent services available in today's rapidly evolving market.

Lesson 3: Transparency Benefits Everyone in the System

The healthcare ecosystem works best when all participants have access to relevant information. When data is siloed or pricing is opaque, inefficiencies develop that ultimately increase costs.

Dr. Waring explained how limited information affects clinical decision-making:

"As clinicians, we don't actually have any idea—we're in the dark—about what we're prescribing. All we can do is make the best decision for the patient in front of us. But not knowing what it is going to cost them, what it is going to cost the payer... it's just a black box."

This disconnect between clinical decisions and financial consequences creates inefficiencies throughout the healthcare system. The right pharmacy benefit partner should provide transparency that benefits all stakeholders.

Lesson 4: Watch for Signs of Inefficient Spending

Understanding the nuances of pharmacy contracts can help employers identify areas where they may be overpaying for medications. Several specific practices were highlighted during the discussion.

Cuban identified indicators that employers should review in their current arrangements:

1. Specialty Drug Carve-Outs: "If you have specialty medication carved out, you're getting ripped off. Period. End of story. Because there's nothing special about three-quarters of those drugs."
2. Price Disparities for Similar Medications: "They have one biosimilar priced at $14,000 a month and the exact same biosimilar with a different name priced at $3,500 a month."
3. Limited Data Access: If you can't see net pricing on claims, you may not have the information needed to make optimal decisions.

Lesson 5: For GLP-1 Drugs, Comprehensive Support Delivers Better Outcomes

Weight loss medications like Ozempic and Wegovy have created new challenges for benefit managers. Their high cost and growing popularity have led to significant budget impacts for many employers. However, the panel suggested that medication alone may not deliver optimal results.

Dr. Waring explained: "If you're going to invest your dollars in covering these drugs for your employees, you should invest in a whole clinical model that will support them."

She noted that clinical trials showing impressive results included comprehensive support systems: "In every single one of those trials, the individuals who were put in them also had to do intensive lifestyle behavior change programs."

Cuban emphasized this point: "You're wasting money. You literally are throwing away money if you don't have a wellness plan associated with it."

Lesson 6: Strategic Action Creates Meaningful Change

After diagnosing the problems plaguing the pharmacy benefits system, the panel turned to solutions. The consensus was clear: employers can no longer afford to be passive participants in a broken system. Taking a proactive, strategic approach to pharmacy benefits is essential—not just for cost savings but for ensuring employees have access to the medications they need without unnecessary financial barriers.

The experts outlined several key strategies that employers should implement to drive meaningful change:

Consider Transparent PBM Models

Legacy PBMs have built their business on hidden fees, rebates, and restrictive formularies that benefit their bottom line—not employers or patients. Cuban made it simple:

"You need pass-through PBMs. You don't need the traditional PBMs."

Pass-through PBMs like SmithRx operate with radical transparency, charging a flat administrative fee rather than taking a cut from inflated drug prices. Employers that shift to transparent, pass-through models gain more control over their costs, ensuring that savings go back to their organization rather than PBM profits.

Prioritize Data Access

Employers cannot make informed decisions without access to comprehensive claims data. Too often, PBMs withhold key cost information, preventing companies from understanding where their money is actually going. The panel emphasized that employers must demand full access to their own pharmacy data, allowing them to:

• Identify pricing discrepancies
• Negotiate better contracts
• Ensure employees are receiving cost-effective treatments

Without data transparency, companies are essentially signing blank checks to PBMs who control pricing behind closed doors.

Explore Alternative Approaches

The pharmacy benefits space is evolving, and employers are no longer limited to the traditional PBM model. The panel discussed innovative approaches that can cut costs while improving access:

• Direct contracting with specialty pharmacies
• Leveraging biosimilars to reduce spend on high-cost specialty drugs
• Working with Cost Plus Drugs and other disruptors that offer lower-cost alternatives

Employers who actively seek out alternatives can significantly reduce costs and increase flexibility in how they provide prescription drug benefits.

Implement Decisively

Identifying the problem isn’t enough—employers must act. Too many organizations recognize the issues with legacy PBMs yet delay making necessary changes, whether due to bureaucratic inertia, misinformation, or fear of disrupting their current setup.

Jake underscored the urgency of action with a lesson from his time in the Marine Corps:

"I was in the Marine Corps. One of the adages you learn as a second lieutenant on day one is: In any situation, the right answer is always direct, immediate action."

The message was clear: Waiting means losing money. Waiting means employees overpaying. Waiting means PBMs continue to profit at your expense. Employers who take decisive action—reevaluating their PBM contracts, demanding transparency, and shifting to cost-saving models—can drive meaningful change.

Lesson 7: Employers Have Significant Market Influence

Perhaps the most encouraging message from the panel was about the latent power employers possess. Despite feeling constrained by the current system, employers collectively represent an enormous economic force that could reshape healthcare.

The panel concluded with a powerful observation from Cuban: 

"The most powerful people in the industry aren't sitting up here. They're sitting out there. Hopefully, you all realize the power you have to change health care for everyone in this country."

This recognition of employer market power represents perhaps the most important takeaway from the event. Working with forward-thinking advisors and innovative PBM partners, employers can drive significant improvements in the pharmacy benefits space.

If you’re an employer, it’s time to take action. The foundations for transformation are in place, but employers must actively engage with the opportunities presented by innovative models and increased transparency.

The pharmacy benefits industry is at an inflection point. By partnering with consultants and PBMs that prioritize transparency and value, employers can help shape a better future for healthcare.