Coverage and cost. While there are many different factors that might affect whether an employer chooses to offer their employees a certain group health insurance plan over another, coverage and cost are, arguably, the two most important elements. With coverage costs rising year-over-year—annual family premiums rose 6 percent in 2025, according to KFF—both employers and employees are put into a tricky situation when it comes to health insurance coverage. This extends to things like prescription drug costs, where rising costs may be more directly felt by employees.
At Payday HCM, we’re very familiar with this issue. Over the years, we’ve handled many different plan renewals for many different clients, often recieving questions on cost. It can be a difficult situation for employers to be in; when the group health insurance coverage you offer feels less like a benefit and more like a large expense. Balancing cost and coverage continues to be a difficult task, but additional resources have come about in recent years to try and take some of the strain off of employers. This includes things like direct-to-consumer prescription models and, more recently, direct-to-employer prescription models.
So, in this article, we’ll be breaking down direct-to-employer prescription models—what they are and how they work. We’ll start by going over the traditional process of how prescription drug costs are typically set and how this process has given rise to alternative options like direct-to-employer platforms. Then, we’ll cover what these platforms look like and how they work. Finally, we’ll go over some additional steps employers can take to help their employees with their cost of care.
In this article, you will learn:
- PBMs and the State of the Pharmaceutical Supply Chain
- What Are Direct-to-Employer Prescription Models?
- How Employers Can Help Employees With Prescription Drug Costs
PBMs and the State of the Pharmaceutical Supply Chain
Before we get into the specifics of how direct-to-employer prescription models work and whether they’re a viable option for most employers, we first need to unpack the current processes and how it’s lead to the creation of direct-to-consumer and direct-to-employer models.
What Are Pharmaceutical Benefit Managers?
While the cost of prescription drugs is influenced by several factors—development and manufacturing costs, patents, supply chain costs—the role of pharmaceutical benefit managers (PBMs), or pharmacy benefit managers, has been subject to the most amount of changes over the past few years.
But what is a pharmaceutical benefit manager? A PBM acts as an intermediary between manufacturers, insurers, and pharmacies, negotiating prices and setting reimbursement rates for pharmacies. Essentially, PBMs are the middlemen between these three parties, playing a key role in how much prescription drugs cost.
Recently, in the United States, a set of rules and reforms aimed at regulating the role of PBMs in setting prescription drug costs was signed into law on February 3, 2026. These regulations, which don’t take effect until 2028, include things like banning price spreading (where PBMs charge insurers more for a drug than they pay the pharmacies that offer it) and requiring PBMs to reimburse all pharmacies the same rates for drugs.
The Rise of Alternative PBMs and Direct-to-Consumer Models
Given the reevaluation of the role of PBMs in affecting prescription drug costs, other alternative solutions have started to become increasingly popular, including alternative PBMs and direct-to-consumer models.
Alternative PBMs, like Rightway Healthcare, AffirmedRX, and Navitus, while performing the same function as a more traditional PBM, have changed how PBMs earn revenue. While traditional PBMs take a cut of the discount they negotiate between manufacturers and pharmacies, alternative PBMs earn revenue from member contracts in a fee-for-service model.
Alonsidge alternative PBMs, direct-to-consumer models have also shifted how both pharmacies and consumers interact with prescription drugs. Essentially, DTC pharmaceutical platforms offer branded prescription drugs directly to consumers. These platforms seek to reduce costs and offer certain prescription drugs to individuals whose insurance may not traditionally cover them.
What Are Direct-to-Employer Prescription Models?
Now that we understand the state of prescription models and what traditional PBMs are, we can look deeper at the emerging field of direct-to-employer prescription models.
From Manufacturers to Employers to Employees
Similar to direct-to-consumer models and platforms, direct-to-employer platforms allow employers to access branded prescription drugs from drug manufacturers. Platforms like GoodRX’s Employer Direct use targeted subsidies to lower the costs of branded prescription drugs that employers can then offer directly to their employees.
Most direct-to-employer and direct-to-consumer platforms are limited to GLP-1 medications for use for weight loss. These models are not intended to replace traditional employer-sponsored health plans—instead, these direct-to-employer models allow employers to reevaluate more traditional pricing structures for prescription drugs that may not be covered by a group health insurance plan.
Looking ahead, while these programs and platforms are currently designed to offer mainly GLP-1 medications, companies with direct-to-employer models, like Waltz Health, are leaving the door open to other medications being added in the future. These direct-to-employer models are largely designed for mid- to large-sized employers.
Regulatory Landscape for Direct-to-Employer Prescription Models
When it comes to any laws or legislation controlling how these direct-to-employer models are able to operate, the field is still relatively in its infancy. As mentioned earlier, the previously passed legislation introducing new rules for traditional PBMs may affect how both employers and consumers come to acquire certain prescription drugs.
In terms of things like the Employee Retirement Income Security Act (ERISA), which requires plan administrators to provide plan participants with information on plan features and funding, as well as establishes fiduciary responsibilities for plan administrators, these models don’t directly affect these responsibilities, but may influence the context in which they are performed.
How Employers Can Help Employees With Prescription Drug Costs
While direct-to-employer programs show potential as a way for employers to offer additional benefits to their employees, they’re still relatively in their infancy. Luckily, there are other practical steps employers can take to help employees with prescription drug costs.
Annual Health Insurance Plan Review
When it comes time for open enrollment and plan renewal, it’s typically good practice for employers to review renewal options through their current insurance provider as well as other options in order to evaluate which plan provides the best coverage for the best cost. This review should be performed with prescription costs in mind, finding the plan that best suits your employees’ needs.
With each new year and plan renewal, the costs of certain drugs may shift or new generic medications may become available or unavailable through certain plan providers. Employers should review this information and solicit employee feedback on their personal experience with prescription drug costs in regards to their health plan to find the best solution.
Additional Communication and Resources
Outside of changes to your organization’s group health insurance plan, employers can also provide additional resources and communication regarding options available to employees to help them cover certain prescription costs. Things like pharmaceutical assistance programs and Rx discount programs can help alleviate high costs for employees.
At the very least, opening the door to discussing alternative options or additional resources is a great place to start. According to Mercer, 40 percent of employers plan on reevaluating the contract models offered by traditional PBMs, demonstrating the popularity of just stepping back and evaluating all of the options available.
Discovering Ways to Lower Employee Benefits’ Costs
A comprehensive employee benefits package is crucial for many reasons, mainly employee retention and talent attraction. However, offering a complete employee benefits package can get costly quickly. This is only compounded by the additional costs of care and things like prescription drug costs. For employers, it can be difficult to find solutions that not only meet employees’ needs but also adequately manage costs. With direct-to-employer prescription models, employers have another tool at their disposal to help employees meet the challenge of rising healthcare costs.
When it comes to employee benefits, cost is one of the biggest factors—both for employers and employees. As an employee, you want the benefits your employer offers to not only help you with costs associated with things like health insurance, while employers want to ensure they can offer comprehensive benefits at an affordable cost. There are many different things to consider when it comes to the cost of a benefits package, specifically the cost of an employee health insurance plan. Check out our article that compares self-funded and fully-insured health insurance plans to see which option will prove to be the most cost-effective for your business.
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