The Cost of Chronic Disease Management: How Employers Can Contain Rising Pharmacy Spend

Prescription drug costs are on the rise, and this doesn’t just affect everyday individuals. It also impacts employers who provide health care plans for their employees. A study by Mercer found that in 2024, prescription health costs increased by 7.4% per employee and have continued to rise throughout 2025.

Further complicating these cost increases is the prevalence of chronic disease in the United States. The CDC estimates that 129 million people in the US have at least one major chronic disease, many of which often require specialty drugs to manage effectively. Many of these medications, especially for conditions like diabetes, can be extremely expensive and put considerable strain on an employer.

As Matthew Herfield, co-founder and CEO of BuzzRx, a prescription savings platform, explains, there are strategies employers can use to contain spending on prescription medication while promoting good health outcomes for employees.

Implement Utilization Management Systems

For many employers, a utilization management system remains one of the most effective methods for containing pharmacy spending. “When it comes to pharmacy cost containment, the combination of step therapy and prior authorization tends to be the most effective,” Herfield says. 

“With step therapy, patients start with a lower-cost drug, such as a generic or biosimilar drug. They only move on to a more expensive alternative if their current prescription isn’t having the desired effect. And those higher-cost drugs require prior authorization to ensure that medicines are being used as intended.”

With nearly a third of American adults not filling prescriptions, skipping doses or cutting pills in half because of rising costs, utilization management systems that lower employee copays or coinsurance expenses can also ensure that more individuals follow their medication guidelines. 

Incentivize Lower-Cost Medications

In line with utilization management, Herfield advises that employers pay close attention to lower-cost drug options, such as generic medications. “Generic medications can cost over 80% less than the brand-name equivalent, even though the FDA requires them to have the same active ingredient, strength, purity and safety,” Herfield explains.

“In addition to their lower starting price, we’re also able to generally negotiate for better discount rates with our own prescription discount program. While generic medications aren’t available for every health need related to chronic conditions, the savings can be significant across the scope of an employer health plan.”

In a Johns Hopkins study that confirmed the 80-85% lower cost between generic and name-brand drugs, one example makes the price differences clear: a rheumatoid arthritis prescription that would cost $330 per month for the brand-name version is just $15 per month for the generic equivalent.

Use Fiduciary Pharmacy Benefit Managers and Other Resources

While employer pharmaceutical plans are generally guided by their pharmacy benefit managers (PBMs), not all PBMs are created equal. In some cases, a PBM may be given financial incentives to include certain prescriptions on a health plan’s formulary, even when there is a cheaper alternative available.

Because of this, employers should look for fiduciary PBMs, which are legally obligated to act in the best interest of their own customers rather than the pharmaceutical companies. Fiduciary PBMs are required to provide transparent pricing with no hidden fees, and customize formularies to balance chronic disease management with cost-effectiveness. Many PBMs also provide analytical resources and additional clinical guidance to help employers optimize their coverage plans based on the needs of their workforce.

This isn’t the only resource that can help directly lower costs. As Herfield notes, prescription discount programs can further reduce out-of-pocket costs, especially for organizations with carve-out provisions for prescriptions. “Prescription discount programs negotiate directly with pharmacies to achieve lower cash prices for a wide range of name-brand and generic drugs,” he explains.

“Quite often, the cash price can be lower than what an employee would pay using their copay or coinsurance. This can also help employees get discounts on prescriptions that aren’t part of their insurance formulary. The BuzzRx discount program can be used regardless of insurance coverage, income or health status. Providing this as another resource can potentially lower out-of-pocket expenses for both employees and their employers.”

Promote Wellness Programs and Preventive Care

While taking direct steps to manage pharmacy spending is certainly important, Herfield also notes that general practices to promote employee wellness can have a meaningful impact on cutting costs.

“Employee wellness programs, when done right, can target the root causes of many chronic diseases,” Herfield explains. “Gym membership incentives, smoking cessation initiatives and other resources can encourage employees to live a healthier lifestyle that reduces the need for ongoing treatment. As an employer, you can also provide education for navigating and managing chronic conditions within the healthcare system, and even encourage regular health screenings. Prevention really is the best medicine, both for employee well-being and for your own financial status.”

Containing Spending for Better Financial Health

While employer-funded health plans have the obligation to cover their employees’ healthcare needs, it is also important that these programs do not jeopardize the organization’s financial health. By implementing these tactics to better control pharmacy spend, employers can keep healthcare expenses at a more manageable level.