The traditional employer pharmacy benefit structure — select a PBM, sign a contract, delegate formulary management — has not disappeared. It remains the dominant model for the majority of self-insured employers, particularly those without the internal benefits staff and actuarial capacity to manage a more complex arrangement. But at the leading edge of large-employer pharmacy strategy, a different architecture is emerging: carved-out specialty benefits managed separately from the medical benefit, purchasing coalitions that aggregate volume across unrelated employers, and in some cases direct contracting with manufacturers that bypasses the PBM entirely for high-cost specialty drugs.
The Specialty Carve-Out Logic
The specialty drug carve-out addresses a specific tension in the integrated PBM model. Standard PBM contracts are priced on a blended basis that includes both generic and specialty drugs, which means the pricing transparency and competition that applies reasonably well to generic drugs is bundled with the specialty drug arrangement where PBM margin is highest and transparency is lowest. Carving out specialty drugs — moving them to a specialty-focused PBM or pharmacy with explicit pass-through pricing and clinical management services — separates the markets and allows each to be contracted and managed on its own terms. The financial case for specialty carve-outs has become more compelling as specialty spend has grown as a share of total pharmacy expenditure; at some scale, the management complexity is justified by the addressable cost opportunity.
The clinical case for specialty carve-outs is less uniformly clear. Integrated PBM models can coordinate specialty drug management with medical claims data in ways that carved-out arrangements may not — identifying patients whose specialty drug use intersects with high medical cost utilization, flagging adherence gaps that predict emergency department visits, and managing the complex prior authorization processes that specialty drugs require. Employers that carve out specialty benefits may gain pricing transparency and cost control in the pharmacy benefit while inadvertently creating care coordination gaps that generate medical cost offsets. The Business Group on Health’s employer survey data suggests that large employers are increasingly aware of this tradeoff and are designing specialty management programs that attempt to preserve coordination even within a carved-out structure.
Coalition Purchasing and Its Promise
Employer purchasing coalitions represent a different approach to the PBM leverage problem — one that seeks scale rather than structural workaround. Coalitions like the Health Transformation Alliance and Pacific Business Group on Health aggregate the pharmacy purchasing volume of multiple large employers, using that scale to negotiate with PBMs and manufacturers on terms that individual employers could not achieve. The coalition model is well-established in the medical benefit market; its application to pharmacy benefits is more recent and still developing.
The coalition model faces a structural tension that limits its disruptive potential. The leverage that a coalition commands derives from its ability to direct member employees’ drug purchasing to preferred vendors and products — which requires member employers to accept formulary standardization across the coalition. Large employers with distinctive employee populations, therapeutic utilization patterns, or geographic footprints may find that the coalition’s formulary design does not optimize for their specific situation. The tradeoff between scale leverage and customization flexibility is the central governance challenge that purchasing coalitions have never fully resolved, and it caps the proportion of total pharmacy spend that coalition arrangements can effectively address.
Direct Manufacturer Contracting
The most ambitious expression of the emerging employer pharmacy architecture is direct manufacturer contracting — employers negotiating directly with pharmaceutical companies for preferred pricing on high-cost specialty drugs, in exchange for formulary preference and active patient management programs that the employer implements through its clinical pharmacy resources. Several large employers — most notably large self-insured corporations with populations large enough to constitute credible contracting counterparties — have piloted direct contracting arrangements with manufacturers of GLP-1 agonists, anti-TNF biologics, and other high-cost agents where the volume concentration makes the contracting economics plausible. The results have been mixed: meaningful price reductions in some cases, complicated by administrative overhead, physician prescribing patterns that resist formulary steering, and the persistent problem that even motivated employers have limited ability to guarantee utilization levels that make manufacturer discounts economically justified. Direct manufacturer contracting is a real strategy for a small number of very large employers. It is not a model that scales readily to the market as a whole.
