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The pharmacy crunch: Leading employers spend 40% of costs on less than 1% of prescriptions

Health and Benefits

August 20, 2019

Data from members of Willis Towers Watson’s Rx Collaborative focus on targeted strategies to control costs

ARLINGTON, VA, August 20, 2019 — Willis Towers Watson’s Rx Collaborative, the largest employer-based pharmacy benefit group purchasing coalition in the U.S., disclosed that specialty drugs accounted for less than 1% of all the coalition’s prescriptions last year, yet totaled 40% of its total drug costs. In addition, the top 10 drugs by gross cost accounted for 20% of employers’ pharmacy spend in 2018.

“Pharmacy represents about 20% of employers’ overall health care spend and is expected to reach 25% by 2020. This cost pressure has many employers turning to a drug purchasing collaborative to help control costs and improve pharmacy benefit performance,” said Nadina Rosier, Pharm.D., head of the Pharmacy practice at Willis Towers Watson. “The successful formula for employers’ prescription drug plans centers on joint purchasing power, tools to manage specialty pharmacy costs, and innovative medical and pharmacy benefit strategies that improve employees’ health.”

Tellingly, the drug-price inflation rate for Rx Collaborative members continued to decrease over the last three years to 3.5% in 2018, compared to 4.2% in 2017 and 6.8% in 2016. Rx Collaborative members, in aggregate, have lower cost trends than their pharmacy benefit manager’s (PBM’s) broader book of business. For example, Rx Collaborative members using one of the largest PBMs experienced a negative cost trend — saving 1.6% in 2018 compared to 2017 — whereas other employers with this PBM paid 0.40% more in plan costs during the same time period.

“Rx Collaborative members have access to ongoing price improvements and aggressive clinical and specialty pharmacy management,” continued Rosier. “Our negotiations and clinical management recommendations consistently produce substantial savings for our members; in fact, upon joining the Rx Collaborative, employers realize savings ranging from 9% to 12% of drug cost over their previous arrangement and up to 25% with an active pharmacy management strategy.”

The top three drugs ranked by gross cost spend last year were specialty injectable immunotherapy drugs indicated for conditions that include psoriatic arthritis, rheumatoid arthritis and Crohn’s disease. Of the non-specialty drugs, four were indicated for diabetes, including two injectable insulin drugs. The gross Rx Collaborative cost per prescription for insulin rose about 4% in 2018, perhaps underscoring why two-thirds of employers ranked metabolic syndrome and diabetes as their number one clinical focus area over the next three years in the company’s 2018 Best Practices in Health Care Employer Survey.

“It’s the specialty drugs that ultimately drive higher costs. Across our coalition, half of the top 10 medical conditions by drug spend were treated with specialty drugs. Our pharmacists and clinical experts manage the implications of specialty drugs’ rapid increase in utilization to ensure clinical appropriateness across both pharmacy and medical channels, and they deliver validated clinical management strategies and regular data on high-cost claims and drug utilization. In 2018, we successfully collaborated with payers to develop weekly reporting that flagged high-cost specialty claims for secondary review, which further controls spend,” Rosier said.

“It’s important to remember even the most successful pharmacy programs can’t do it alone. Drug plans are just one part of an integrated benefit approach that employers can use to improve their population health and wellbeing,” concluded Rosier.

About the Rx Collaborative

The Rx Collaborative began in 2003 as the first consultant-led, fully transparent prescription drug coalition providing employers with drug purchasing power, transparency in pricing and pharmacy benefit manager oversight, thus helping members negotiate PBM contracts based on transparency and pricing disclosure. Participating employers have access to a team of dedicated pharmacists, actuaries, health management and pharmacy consultants, health care technology specialists and pricing experts.

In 2018, the Rx Collaborative negotiated significant savings for 5.1 million people taking nearly 45 million prescriptions across the U.S. and Canada. Current membership includes over 400 employers as of August 1, 2019, with over 75 Fortune 500 companies. Since its inception, the Rx Collaborative has enabled clients to save nearly $3 billion, and effective January 1, 2019, eligible clients received pricing improvements that will generate significant additional savings from their pharmacy contract. Willis Towers Watson expects to announce further program model evolutions, calculated to drive additional value in the shifting rebate landscape in 2020.

For more information on Rx Collaborative membership, email

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential.

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